Under the GST regime, banks that import gold and other precious metals will have to bear 3% Integrated Goods and Services Tax (IGST), which can then be claimed as input tax credit. This was announced by the Central Board of Excise and Customs (CBEC) while providing clarifications on GST for gems and jewellery through some Frequently Asked Questions (FAQs).
The board said that previously banks were not paying VAT when importing precious metals. Only customs duty was applicable. But under the GST regime, 3% IGST is applicable on imports of precious metals, over and above the basic customs duty.
The government also stated that banks, being registered entities, would pay IGST on overseas supply of precious metals in which the ownership is vested during the movement of the commodity. The FAQ clarified that overseas entities do not effect the import; so they would not be liable to pay the tax.
Before the implementation of GST, import of gold attracted 10% basic customs duty. A countervailing duty (CVD) of 12.5% was further levied. After CVD has been subsumed by GST, in addition to the basic customs duty of 10%, Integrated Goods and Services Tax of 3% is applicable. This is relevant for all imports from 1 July 2017.
The CBEC also added that in situations where the total value of the gold ornament is Rs.30,000 (including Rs.2,000 making charge), the GST is payable at 3% on the total value of the transaction. This is irrespective of whether the making charge is displayed separately or not.
In reply to an FAQ on GST treatment when the precious metal is a raw material issued to a job worker and returned as a finished commodity, the board clarified that the registered job worker would have to pay 5% GST on job charges. The jeweller can then take credit of the GST paid on the work.