Proposed GST reform raises hopes of rate cut on gold; even a 1% drop could save buyers thousands

Prime Minister Narendra Modi's announcements on Goods and Services Tax (GST) rate rationalisation, once implemented, will mark one of the most significant economic reforms since its rollout on July 1, 2017. PM Modi’s remarks and the GST Council meetings scheduled for August 20-21 reflect a clear intent by the government to streamline the GST framework, particularly for essential goods and services such as healthcare and life insurance, as well as the elimination of the compensation cess. 

However, it is unclear if gold will be part of the GST revamp. Prabhat Ranjan, senior director (partner), Indirect Taxes at Nexdigm, highlights that gold continues to be classified under a special rate and is not targeted for change under the current rationalisation agenda. “Therefore, no immediate or indirect impact is anticipated on gold pricing. The focus remains on boosting consumption and tax efficiency across other categories."

That said, the Prime Minister’s speech has raised expectations. “If the rates are revised, it will encourage more customers to buy jewellery," says Piyush Gupta, director at PP Jewellers by Pawan Gupta. 

Even a small GST reduction on gold will make a significant difference for customers as jewellery is a high-value purchase. Currently, the applicable GST rate on gold jewellery is 3% with an additional 5% on making charges. "This (the rates) has been the practice since GST first came in. Over time, people have come to accept GST as part of their purchases, but jewellery is never a small buy; it’s often for weddings, milestones, or as an investment. That’s why even a small change in tax feels important. It can make customers feel more at ease with their decision and make the overall experience of buying jewellery more satisfying," says Mira Gulati, founder and principal designer, Mirari. 

Although international markets primarily determine gold prices, GST is a factor that directly contributes to the final price. Hence, even a small reduction will be reflected in the bill. "On jewellery worth ₹5 lakh, a 3% GST means an additional ₹15,000. If the rate is reduced, buyers will save directly on this tax amount. For example, if GST is lowered by 1% (that is, from 3% to 2%), a customer will save around ₹5,000 on a purchase of ₹5 lakh," Gupta adds.

While ₹5,000 may not seem like a considerable amount compared to the price of the jewellery, it may still come as a relief for any customer. For people who view jewellery as an investment, tax savings add to the overall satisfaction of owning it. "This positivity can encourage more purchases during the festive season. For jewellers, it also builds trust that the government is supporting industries like theirs and making aspirational products more reachable for people,” Gulati says as she highlights that a GST cut will have a significant impact, not just in numbers but in sentiment as well.

Besides, Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL), says, "The immediate impact may be limited because no formal GST Council decision has yet been announced. Markets usually wait for official notifications before reacting. If implemented, a reduction will boost demand in the festive and wedding season, especially at a time when gold is at record highs. Without execution, the speech alone may not influence jewellery prices or consumer buying sentiment significantly."