Selling old jewellery or bullion will attract a 3 percent goods and services tax (GST) on the value realised, revenue secretary Hasmukh Adhia said on 13th July 2017. But, if the jewellery is sold and new one bought through the proceeds, the 3 percent tax paid will be deducted from the GST payable on buying new jewellery.
The sale of old gold by individuals for a consideration won’t attract the goods and services tax, the Finance Ministry clarified, providing respite to people who exchange jewellery.
On 13th July 2017 the ministry said “Even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course of furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se.”
The sale of old jewellery by an individual to a jeweller will not attract provisions of section 9(4) of the CGST (Central GST) Act and a jeweller will not be liable to pay tax under reverse charge mechanism on such purchases.
Reverse Charge Mechanism Under sale Of Old Gold Jewellery
The sale of old jewellery by an individual to a jeweller will not attract the provisions of Section 9 (4) of the GST act and the jeweller will not be liable to pay tax under reverse charge mechanism on such purchases.
However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax will apply under reverse charge mechanism. Under this mechanism, the liability of paying tax is on the receiver of goods or services and not on the supplier.
Gold jewellery attracts 3% tax under GST. Section 9 (4) of the Central GST Act mandates that tax on supply of taxable goods (gold, in this case) by an unregistered supplier (an individual, in this case) to a registered person (the jeweller, in this case) will be paid by the registered person under the reverse charge mechanism.
Section 9(4) Of CGST Act
As per Section 9(4) of CGST act 2017 any Supply of goods or service from an Unregistered supplier to a Registered supplier will cast liablity to Pay GST to the Government in the form of RCM.
Case of job worker
If an old jewellery is given to the jeweller for some modification, then it would be considered as job works and 5 percent GST would be levied. But if old jewellery is melted and a new one is given, then it means that trader is a registered person and it is as good as buying gold in form of old jewellery.