GST on Gold Jewel

[KUMAR Narasimhan]

Dear Sir / Madam,

GST Registered Gold Merchant used his wife personal Jewelry in his business, will there be any legal compliance?

If no issue then he has to pay 3% on sale value of Jewel. Please clarify

[KASTURI SETHI]

RCM is not applicable under Section 9(4) of the Act. It is not a supply. However, when the registered person sells that jewellery further whether after conversion or otherwise GST @ 3% has to be paid. No job work issue involved.

[KUMAR Narasimhan]

Dear Sir,

Thank you so much for the clarification sir

[ARVIND JAIN]

Kasturi Sir is correct As per GST angel, I agree.

However, Income Tax angel should not be missed if the value is high. As a gold merchant, he will have to record it as URD purchase and it would be treated as Sale at wife part and Capital gain is to be paid @20%.

Some other options are available that all will depend upon the real facts of the case.

[KASTURI SETHI]

Sh.Arvind Jain Ji,

Sir, Thanks for your concurrence. I am also thankful to you for enrichment of my knowledge on Income Tax aspect.

[KASTURI SETHI]

Sh.Arvind Jain Ji,

"Some other options are available that all will depend upon the real facts of the case".

Sir, Pl. clarify whether the words, 'some other options' refer to Income Tax angle or GST angle.

[KUMAR Narasimhan]

Dear Arvind Jain ji,

Gold Merchant receives a Gold gift from his father in law on the occasion of his Marriage. Now he is trying to convert the capital Asset to trading (bringing the gold to his business). In this situation will he pay capital gain Tax? or Income Tax to be paid from profit of his business. Please clarify it sir

[ARVIND JAIN]

Sir Both Income Tax & GST angel just in treatment and passing of entry, which will have Impact on books of Account more in respect to Income tax Angel (just no urd purchase will be shown) and in GST there is no other option but to pay GST at the time of Sale.

Some gold merchants book Gold input qty Via Stock JV as Gold received for labour job work in books and ultimately settle it before the end of the year via actual purchase but it would not be a wise practice and again if the amount is high which is normally possible in Gold transaction than GST paid first and later having Input credit to be settled till your GP reach to the extent of that amount. Gold loan is another way and again pint of discussion and many if and buts..so leaving that.

With regard to changed facts by KUMAR Narasimhan, of gift on marriage please note that Section 45(2) of the Income Tax Act deals with the cases where a capital asset is converted into stock in trade. Whenever a capital asset is converted into stock in trade by an assessee it is deemed as a transfer of capital asset and attracts capital gain provisions, in spite of the fact that the ownership of such capital asset doesn’t change by such conversion. Later on sale, you have to again pay Income tax on business profit (if there is ) as per the normal provision of Income-tax.

AI Summary

Gold Merchant Must Pay 3% GST on Personal Jewelry Sales; Capital Gains Tax Possible Under Section 45(2) IT Act A GST-registered gold merchant inquired about using personal jewelry in his business and its legal implications. It was clarified that Reverse Charge Mechanism (RCM) is not applicable, but GST at 3% must be paid upon sale. Additionally, income tax implications were discussed, noting that high-value transactions should be recorded as unregistered dealer purchases, potentially incurring capital gains tax. Converting personal gold gifts into business assets may trigger capital gains tax under Section 45(2) of the Income Tax Act, as it is considered a transfer of capital assets. Various accounting treatments and strategies were also discussed.