The authors have studied the effect of annealing on the magnetic and the structural properties of Gd focused ion beam implanted GaN samples. Molecular beam epitaxy grown GaN layers, which were implanted with 300keV Gd3+ ions at room temperature at doses 2.4×1011 and 1.0×1015cm−2, are rapid thermally annealed in flowing N2 gas up to 900°C for 30s. X-ray diffraction results indicate the presence of Ga and N interstitials in the implanted layers. Their densities are also found to reduce upon annealing. At the same time, magnetic measurements on these samples clearly show a reduction in the saturation magnetization as a result of the annealing for the lowest Gd incorporated sample, while in the highest Gd incorporated sample it does not change. These findings suggest that Gd might be inducing magnetic moment in Ga and/or N interstitials in giving rise to an effective colossal magnetic moment of Gd and the associated ferromagnetism observed in Gd:GaN.