Silver GST Rate and HSN Code

Before introduction of GST, a commodity was taxed at multiple levels per the old indirect tax regime.

 

Taxation on silver was no different before the GST regime as a 1% excise duty was levied on it. On the other hand, states levied a value-added tax (VAT) of 1%, which could vary depending on a particular state’s policy. In addition to these taxes, there were certain other cesses and surcharges that were applicable when you purchased silver. 

 

However, GST did away with a multitude of taxes applicable to the purchase of silver at the Central and State level. Instead, the GST Council, the deliberative body of States and the Centre that decides on GST-related issues introduced a unified tax charged at 3%.  

 

Each commodity under the GST regime is identified by a unique code called the HSN code. HSN, or the ‘Harmonised System of Nomenclature,’ is a system devised by the World Customs Organisation for the systematic classification of different goods. 

 

Originally, it had six digits, but the Customs and Central Excise in India added two more digits. The same system of classification of goods has been adopted under the GST regime. Here is a table presenting GST rates on different silver HSN codes:  

As mentioned above, a multitude of taxes were applicable on the purchase of silver. However, the GST on silver is a unified charge taxed at 3%. While the GST on silver has eliminated these multiple taxes, the rate of taxation has increased.

 

The following table presents how the introduction of GST has influenced the pricing of silver:

Disclaimer: Aforementioned silver rates are arbitrary and have been mentioned for analysing the impact of the GST rate on the price of silver.

The following are the various types of taxes you will have to pay on your capital gains from selling your silver jewellery.

1. Short-term Capital Gains Tax 

If you sell silver before completing 36 months since its purchase, Short-term Capital Gains (STCG) tax will be applicable. Short-term capital gains are added to your taxable income and taxed as per the applicable tax slab rates.

2. Long-term Capital Gains Tax

If you sell your silver after holding it for more than 36 months, you will have to pay Long-term Capital Gains (LTCG) tax. The LTCG tax rate on the sale of movable property like gold and silver is 20.8% with indexation. 

3. Taxes on Silver ETFs   

Silver ETFs, or Exchange-traded Funds (ETFs), were launched in 2022. These investment avenues invest 95% of the funds towards silver or silver-linked securities. The returns you earn on silver ETFs are also classified as capital gains. 

 

So, the taxation on silver ETFs is the same as the sale and purchase of silver jewellery, bar, or coins. 

To calculate the price of silver for taxation, you need to understand that the cost of silver jewellery also includes other elements, such as hallmarking and making charges. The formula for calculating the silver price is: 

 

Rate of silver = Silver price per gram X the volume of the metal you have purchased X purity of the metal

 

To sum up, it is crucial to consider these essential points when planning to purchase silver. Knowing the taxes and other charges applicable to silver can help you make informed decisions.