The GST Council has rationalised tax rates for a range of goods, moving toward reducing the four-slab structure to just two. Several items earlier taxed at 12% and 28% have now been shifted into the 5% and 18% slabs.
This raises a question: does that mean gold and silver, currently charged 3% goods and services (GST), will also move up to 5% in line with the new two-slab structure?
Experts say no.
“Under the GST framework, most goods so far were taxed at standard slabs of 5%, 12%, 18% or 28%. However, gold, silver and other precious metals fall into a special category with a much lower GST rate of 3%. This slab has not been touched in the recent reforms,” said Mayank Mohanka, founder, TaxAaram India, and a partner at S.M. Mohanka & Associates.
This special 3% rate was introduced to keep taxes on gold and silver jewellery close to the earlier regime of about 2.5% (excise duty plus state VAT). A lower rate ensured the GST rollout did not lead to a sudden spike in jewellery prices.
Unlike many other sectors, the value of these goods is very high but jewellers operate on thin margins of just 2-5%. Taxing them at 18% or more would not only have pushed up consumer prices sharply but also locked up large amounts of working capital.
“The rationalization of GST rates into a two-slab structure applies only to goods previously taxed at 5%, 12%, 18% and 28%,” said Dainik Gohel, managing partner, DGNM & Associates LLP. “The 3% special rate for precious metals and the new 40% rate for ‘sin’ and luxury goods are separate. Since yesterday’s (Wednesday) announcements did not mention the 3% category, we’ll need to wait for the formal notification for complete clarity.”
It’s important to note that while gold and silver, including 22-carat gold bars, coins and bricks, are taxed at 3%, the making charges on jewellery and other forms of physical gold are treated as a service and attract 5% GST separately.
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Digital gold also attracts 3% GST at the time of purchase, applied to its intrinsic value. If digital gold is later converted into physical gold, an additional GST is charged on the final product. Gold ETF units, however, are exempt.
For investors seeking gold exposure, ETFs remain the most cost-efficient route since they avoid GST and making charges. By contrast, coins and bars, though carrying lower making charges of 2-3% compared to jewellery, still eat into net returns. Their value can only be realised when cashed out or converted into jewellery—both of which involve shelling out anywhere between 3-30% in fees and making costs.
