FTA APPROVED TAX AGENCY
VAT Returns deadline is 28th of every month.             Excise Tax Returns deadline is 15th of every month             ESR Notification Submission deadline, 6 months from the end of the financial year             ESR Report Submission deadline, 12 months from the end of the financial year             Click here to know the Foreign Exchange (FX) rates applicable for VAT from the UAE Central Bank website
+971 4 2699 329
Clarification on supply of gold & making charges to be levied by the jewellers

Clarification on supply of gold & making charges to be levied by the jewellers

Many a times gold jewellers receive consideration for supply of gold & making charges together. The issue faced by tax payers is on applicability of VAT legislation on making charges.

 

1. What is the applicability of VAT legislation on gold & gold items procured?

Tax registrant supplying gold items shall not impose VAT on supply if following conditions are satisfied & the recipient shall be liable to pay VAT on reverse charge basis.

  1. The recipient is registered for VAT
  2. The supplier obtains a written declaration from the recipient confirming the following:
    • The procured gold items will be used to produce or manufacture gold items or re-sell gold items
    • The recipient is registered on the date of supply
    • The recipient shall account for the VAT on gold items procured by him

 

2. What is the applicability of VAT legislation on gold & gold items procured along with making charges?

The applicability will depend on whether the supplier considers it as a single composite supply of a gold item or multiple supplies consisting of both goods and services.

 

a) Single composite supply

If the supplier charges a single price for the gold including the making charges it will be considered as a single composite supply if the following conditions are met:

  1. If the supply consists of a principal component i.e. gold and making service.
  2. The price of gold item & making charges are inseparable.
  3. The gold & making charges supplied by the same supplier.

If these conditions are met the supply of gold including making charges would constitute to be a single composite supply & reverse charge can be applied.

In this case, both the supplier & recipient are required to retain sufficient supporting evidence including a valid tax invoice stating that reverse charge mechanism was applied.

 

b) Multiple supplies

If the supplier charges separately for the gold items and making charges it refers to multiple supplies. In this case, the supplier is required to treat each component as a separate supply & apply correct tax treatment to each separate component.

Hence in this case, VAT related supply of gold items should be accounted under reverse charge mechanism. While making charges will be chargeable to VAT separately.

The supplier will be required to issue valid tax invoice in respect of the taxable supply of the making charges.

 

How Spectrum Auditing can help you?

Reach out to Spectrum Auditing to know more about everything related to VAT. We will guide you as the right partner in the right direction in letting you make the right decision. Spectrum is your partner in letting you grow in your journey. Reach us: Email us at [email protected] or call us @ +971 4 2699329.

 



Contact

balaram

Balaram Vuchidi

Managing Director

+971 50 9866 466 [email protected]
Anti Money Laundering Law   contact us
Enquire with Us