GST on Silver with HSN Code

The Goods and Services Tax (GST) on silver has been a significant topic since its implementation in July 2017. As of 2024, the GST rate applicable to silver is 3% on the value of the metal. The HSN (Harmonized System of Nomenclature) code for silver is 7106.

Particulars

HSN Code

 CGST Rate

 SGST/UTGST Rate

 IGST Rate

Real silver  thread,  combined  with textile thread

5605 00 10 2.5% 2.5% 5%
Silver unwrought or in semi-manufactured or powder form 7106 1.5% 1.5% 3%
Base metals clad with   silver, semi-manufactured 7107 1.5% 1.5% 3%
Silver, clad with gold, semi-manufactured 7109 1.5% 1.5% 3%
Base metal silver, clad  with platinum, semi-manufactured 7111 1.5% 1.5% 3%
Articles of silversmiths’  wares and parts thereof 7114 1.5% 1.5% 3%
Silver filigree work 7113 11 10 1.5% 1.5% 3%
Bar 71069220 1.5% 1.5% 3%
Sheets, Plates, Strips, Tubes, And Pipes 71069210 1.5% 1.5% 3%
Grains 71069110 1.5% 1.5% 3%

GST on Silver Coins and Bars

Silver coins usually attract a GST rate of 3%. This rate applies to silver coins considered legal tender, while the treatment for investment-grade coins may vary slightly. The introduction of a consistent tax rate has simplified transactions for both buyers and sellers. Silver bars are also taxed at 3%.

GST on Silver Ornaments

Silver ornaments are also subject to a GST of 3%. Additionally, making charges for these ornaments are charged at 5%.

How to Calculate GST on Silver?

Step 1: Calculate the Price of Silver

  • Use the formula:

Price of Silver=Price per gram×Volume (grams)×Purity

Step 2: Calculate GST on Silver

  • Apply the GST rate of 3% to the price of silver.
  • Use the formula: 

GST Amount= Rs (3/100)×Price of Silver

Step 3: Calculate the Total Price of Silver

  • Add the GST amount to the price of silver

Total Price=Price of Silver+GST 

Step 4: Calculate GST of Making Charges (if applicable)

  • For silver jewelry, an additional GST of 5% on making charges is applied.

Use the formula:
Making Charges GST= (5/100)×Total Price

Step 5: Calculate Final Total Price

  • Add the making charges GST to the total price

Final Total Price=Total Price+Making Charges GST

Example Calculation

Assume:

  • Price of silver = Rs 95 per gram
  • Volume = 100 grams
  • Purity = 1 (for 100% pure silver)

Step 1: Calculate the Price of Silver

Price of Silver= Rs 95 (Rs/gram)×100 (grams)×1= Rs9,500

Step 2: Calculate GST on Silver

GST Amount=Rs (3/100)×9,500= Rs285

Step 3: Calculate the Total Price of Silver

Total Price=Rs (9,500+285) =Rs9,785

Step 4: Calculate GST of Making Charges (if applicable)

GST on Silver Making charges for jewelry = 5% of the Total Price

Making Charges GST= Rs (5/100)× 9785 = Rs 489.25

Step 5: Calculate Final Total Price

Final Total Price=Rs (9,785+489.25) = Rs 10,274.25

Calculating GST on silver purchases involves straightforward steps that ensure transparency in pricing. In this example, the total cost for 100 grams of silver at Rs 95 per gram, including GST and making charges, amounts to Rs 10,274.25

Pre- and Post-GST Silver Rates

Before the implementation of the Goods and Services Tax (GST) in July 2017, the taxation structure for silver in India was complex and varied significantly from state to state. Various indirect taxes were levied on silver, including Value Added Tax (VAT) ranging from 1% to 5%, excise duty at 1%, and local levies. These taxes changed depending on the state, resulting in a convoluted pricing mechanism that often led to price discrepancies across different regions.

For example, in states like Maharashtra and Gujarat, the VAT rates on silver could be as high as 5%, while other states had additional local taxes that further increased the cost. This multitude of taxes not only complicated the purchasing process for consumers but also created significant barriers for businesses, resulting in inconsistencies in pricing and taxation compliance. The implementation of GST on silver at the rate of 3% across all states has standardised the pricing of silver in India.

Types of Taxes Imposed on Silver

  1. GST (Goods and Services Tax):

    Applicable at a rate of 3% on silver purchases, including bullion, coins, and ornaments. This simplifies the tax structure by replacing multiple state and central taxes.

  2. Short-term Capital Gains Tax:

    If silver is sold within three years of purchase, any profit is subject to short-term capital gains tax, which is taxed at the individual’s applicable income tax rate.

  3. Long-term Capital Gains Tax:

    For silver held for more than three years, profits are subject to long-term capital gains tax, currently set at 20% with indexation benefits, which can reduce the tax burden.

  4. Silver ETFs Tax:

    Investments in silver exchange-traded funds (ETFs) are also subject to capital gains tax. Gains from selling silver ETFs are treated similarly to physical silver, with short-term and long-term capital gains tax applied based on the holding period.

These taxes collectively influence the investment decisions related to silver and its derivatives.

Impact of GST on the Silver Industry

Post-GST, the tax rate on silver fell drastically. This reduction led to a notable shift in market dynamics:

1. Price Stabilization:

The uniform tax rate has contributed to more stable prices for silver across the country. Consumers now face fewer discrepancies in silver prices, regardless of where they purchase it.

2. Competitive Market:

The reduction in tax rates has made silver more affordable for consumers, potentially increasing demand. As a result, retailers and wholesalers have had to adopt competitive pricing strategies to attract buyers.

3. Increased Transparency:

The simplification of the tax structure has fostered a more transparent market, where consumers can easily understand the price breakdown, including the tax component.

4. Market Variability:

Although the GST has standardized the tax rate, silver prices continue to fluctuate based on global market conditions, currency valuations, and domestic demand. For instance, the price of silver experienced significant volatility in 2020 and 2021 due to global economic uncertainties, impacting consumer purchasing behavior.

GST Input Tax Credit (ITC) on Silver

Businesses engaged in the sale of silver can claim Input Tax Credit (ITC) on the GST paid for silver purchases. To be eligible to claim Input Tax Credit, the following conditions must be met:

  • The silver must be used in the course of business.
  • Proper tax invoices must be maintained.
  • The GST must have been paid on the purchase.

Frequently Asked Questions (FAQ’s)

1. What is the HSN code for silver?

The HSN code for silver is 7106.

2. What is the GST rate for silver in India?

Silver is taxed in India as per the applicable GST rate of 3.00%. 

3. What Are the Different Ways to Invest in Silver?

Silver can be invested in through physical forms like coins and bars, silver ETFs, and mining stocks.

4. What are the Critical Factors Affecting the Price of Silver?

Supply and demand dynamics, economic conditions, and global industrial usage influence silver prices.

5. What is the GST on silver utensils?

The GST on utensils of silver is 3% as well.

6. What is the GST on scrap silver?

Scrap silver is also subject to a 3% GST.

7. What is the difference between the GST rate on silver and other precious metals like gold?

Gold has a GST rate of 3%, similar to silver, but the overall tax structure may vary based on local regulations.

8. Does GST apply to exports of silver?

Exports of silver are generally exempt from GST, promoting international trade.

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