gold prices The record high was touched after the start of the pandemic. In March 2020 (the beginning of the pandemic), gold was trading in the range of Rs 41,000 to Rs 43,000. However, it crossed the Rs 50,000 level in July 2020 and touched a record high of Rs 56,000 in August 2020. (according to data)
) A 15% hike in import duty will make it even more expensive for customers to buy gold.
Gold buying has been increasing since last year. Indians love to buy gold as they consider it the safest investment, protected from inflation and easily liquidated in times of financial emergency.
How does a jeweler calculate the value of gold jewelery
Since gold is traded as a commodity, its price varies daily. Moreover, every city has its own jewelery association and the gold rate declared by these associations varies from city to city.
The import duty tax on gold purchased by the jeweler, which is then converted into a piece of jewellery, will already be included in the price of the piece. Thus, when a customer buys gold jewellery, the import duty is already added to the price of gold.
While the domestic price of gold will continue to vary with variations in international prices, the actual purchase cost for domestic buyers will exceed the quantum of increase in duty percentage, irrespective of international gold prices/imported cost of the yellow metal.
Most of the jewelers calculate the final price of gold jewelery using the formula given below:
Present price of 10 grams (22 KT or 18 KT) Gold X (Weight in grams) + Making charge + GST at 3% (Jewelry cost + Making charge) + Hallmarking charge Rs 35 per item.
Nishant Shah, Partner, Economic Laws Practice, says, “As most jewelry manufactured for the domestic market from gold imported into India, such an increase in the rate of customs duty on gold is bound to have consequential implications for Indian customers. The new jewelery is likely to be more expensive for the Indian customers, who will therefore lean towards redesigning their old/ancestral jewellery.”
Why was the import duty on gold increased?
According to the press release issued by the Finance Ministry today, “There has been a sudden spurt in gold imports. A total of 107 tonnes of gold was imported in the month of May and imports have been significant in June as well. The surge in gold imports added to the pressure. Used to be current account deficit, To curb the import of gold, the customs duty has been increased to 15% from the existing 10.75%.
Abhishek Jain, Partner, Indirect Taxes, KPMG in India says, “The government has increased the customs duty rate for import of gold bars to 11.85%/12.5% from the existing 6.9%/7.5%, while for social welfare. The surcharge is exempted from that. This change will slightly reduce the outflow due to gold imports and will help stabilize the INR to USD ratio.”
According to Bloomberg, this is the reverse of last year when India reduced the tax in the federal budget to 7.5%. Explain that the government has reduced the custom duty on gold to 7.5 percent from the earlier 12.5 percent in Budget 2021.
is it safe to buy gold
However, the government has made buying gold safe to protect customers from fraudulent jewellers. As per the latest rules effective from June 1, 2022, jewelers can sell only hallmarked gold jewellery, irrespective of their purity. Every gold ornament should bear a hallmark mark, irrespective of the carat.
The government has also amended the indications for purity of gold ornaments. From July 1, 2021, hallmarked gold jewelry will have the following indications:
a) BIS logo
b) purity / fineness grade
c) Six-digit alphanumeric code, also known as HUID.
Note that a jeweler will charge you an additional Rs 35 for every gold item you buy.