GST ON GOLD LOAN TO JEWELLARY HOUSE

[ARVIND JAIN]

Dear Expert,

Would like to know GST implication on Gold loan (Suppose 1kg of Gold ) is given by depositor to Jewellery house (duly registered under GST) and in return Jewellery house will return either 1.1 Kg of gold after one year period or 1 Kg gold and interest @ 10% on the base value transaction of 1kg gold on the date of event i.e taking possession of gold. I am clear on other aspects Such as TDS and A/c entry and GST applicability on sale by Jewellery house but Have confusion over

Q1- GST applicability on depositor transaction

Q2- Any Rbi guideline- restrictions on the above said transaction between two Individuals

Q3- If the depositor is Also registered under GST , is this transaction will be treated as Gold loan on temporary basis and okay if he receive back gold after a specified period of time or It would be treated as Supply and depositor is also liable to pay GST.

For reference you may go through one link on related subject which will help the reader of question to understand in detail.

https://www.topcafirms.com/white-paper/accounting-and-taxation-aspects-of-gold-deposit-scheme

Thanks.

[Shilpi Jain]

This is in the nature of loan and the consideration (either monetary or non-monetary) received would be exempt under GST.

[ARVIND JAIN]

Dear Shilpiji, thanks for your response. Hope you have gone through the link given and read the article wherein as per my understanding at the end of the article they have said it to more as a Sale(Supply) transaction under vat law. Since the article is of vat era, I thought It to be posted with my query on GST. Apparently, I agree with you that no Loan transaction should be treated as Supply but in this specific situation wherein product changes nature at the discretion of Jewellery house and all others issues as said in the linked article, which made me think twice.

It would be more helpful for me if other experts Such as Kasturi sir and others say something on this.

AI Summary

GST treatment of gold loan: loan consideration treated as exempt rather than a taxable supply in typical arrangements. Where a jewellery house receives gold from a depositor and returns the same or more gold or monetary interest, the transaction is characterized as a loan; the consideration received is treated as loan consideration and is exempt from GST. Outstanding issues include potential central bank restrictions and whether a GST-registered depositor would cause the arrangement to be treated as a taxable supply, particularly where the jewellery house's discretion alters the product's character.