GST on Gold and Jewellery — 3% Gold Rate, Making Charges and Old Gold 2025

<p>Gold and gold jewellery attract GST at 3% under HSN code 7108 for gold in primary forms (bars, coins, nuggets) and HSN 7113 for gold jewellery and articles. This preferential rate of 3% — significantly below the standard 18% or even the 5% essential goods rate — was a deliberate policy choice by the GST Council to keep gold taxation moderate and avoid disrupting India's massive gold jewellery market.</p><p>India is the world's second-largest gold consumer and the gold jewellery sector employs millions of artisans and retail workers across the country. A high GST rate on gold would have displaced purchases toward the unorganised and unofficial market, reducing overall tax collections and harming the organised trade. The 3% rate was chosen to balance revenue collection with market neutrality — it is lower than the pre-GST combined incidence of VAT and excise on gold in most states, making the transition to GST relatively painless for the sector.</p><p>The 3% GST applies to all forms of gold: raw gold bars and ingots purchased by jewellers from refineries, gold coins sold by banks and non-banking entities, gold ETF units (though ETF transactions are financial instruments and the GST implications are on the fund management service, not the gold itself), and all gold jewellery whether plain gold, studded with gemstones, or gold-plated. Gold imported into India attracts basic customs duty plus IGST at 3% on the customs value — the same 3% rate applies but on the assessable customs value which includes CIF (Cost, Insurance, Freight) plus basic customs duty.</p>

<p>The making charges component of gold jewellery attracts GST at 5% under SAC code 998892 (fabrication services on metal). When a customer buys gold jewellery, the invoice should have two distinct components: the gold value (based on current gold price per gram multiplied by the weight) taxed at 3% GST, and the making charges (the artisan or manufacturing fee per gram or piece) taxed at 5% GST.</p><p>For example, a 20-gram gold necklace at Rs.6,000 per gram with Rs.800 per gram in making charges would be invoiced as: gold value Rs.1,20,000 (20g × Rs.6,000) plus GST at 3% = Rs.3,600; making charges Rs.16,000 (20g × Rs.800) plus GST at 5% = Rs.800. Total invoice: Rs.1,36,000 + GST Rs.4,400 = Rs.1,40,400. If the jeweller incorrectly combines both components and charges 3% on the total Rs.1,36,000, the GST would be Rs.4,080 — Rs.320 less than required, constituting short-payment.</p><p>For certified hallmarked jewellery with BIS hallmark, the hallmarking charges are typically included within the making charges and are taxed at the 5% rate. For jewellery purchased on order (custom design), the making charges are determined by the complexity of design and are negotiable — but the GST rate remains 5% regardless of the making charge amount. Wastage charges (the small amount of gold lost during the manufacturing process) are treated as part of making charges and attract 5% GST.</p>

<p>Many customers exchange old gold jewellery when purchasing new jewellery, with the old gold value adjusted against the new purchase price. The GST treatment of old gold exchange requires careful invoicing by the jeweller to accurately determine the tax liability.</p><p>When a customer exchanges old gold, the transaction is treated as two separate events under GST: (1) The customer 'sells' the old gold to the jeweller. This is a taxable supply of goods. GST at 3% applies on the exchange value (the value at which the jeweller credits the old gold). (2) The jeweller sells new jewellery to the customer. GST at 3% on gold value and 5% on making charges applies on the full invoice value of new jewellery.</p><p>In practice, the net amount the customer pays is the new jewellery price minus the old gold credit. The GST invoice should show the full value of new jewellery with applicable GST, and the old gold exchange value should be shown as a discount or payment credit — not as a deduction from the taxable value. If the jeweller is registered and the customer is unregistered (retail), the jeweller declares the old gold purchase in GSTR-1 as an inward supply (purchase from unregistered person) and pays 3% GST on it under RCM if applicable. In practice, many jewellers absorb this complexity by netting the transaction but must ensure their GST returns reflect both the full sale and the old gold purchase accurately.</p>

<p>Precious stones other than gold attract different GST rates. Diamonds — both natural and synthetic/lab-grown — attract GST at 0.25% under HSN 7102. This extremely low rate is a deliberate policy to keep India's diamond cutting and polishing industry globally competitive. India processes approximately 90% of the world's rough diamonds and the low 0.25% GST rate ensures the value-addition activity remains cost-competitive with competing centres like Dubai and Belgium.</p><p>For diamond jewellery, the invoice must separately show the diamond value at 0.25% GST and the gold (or platinum) metal value at 3% GST and the making charges at 5% GST. This three-way split is mandatory but creates invoicing complexity for jewellers selling diamond-studded pieces. For coloured precious and semi-precious gemstones — rubies, emeralds, sapphires, topaz, amethyst — HSN 7103 applies at 0.25% GST for natural stones.</p><p>Silver in primary forms (bars, grains, powder) and silver jewellery attract GST at 3% under HSN 7106 and 7113 respectively — the same rate as gold. Platinum jewellery also attracts 3% GST under HSN 7110. Silver articles of everyday use (silverware, cutlery, utensils) attract 3% GST. Gold-plated and silver-plated articles — base metal with gold or silver coating — are classified under HSN 7114 or 7115 and attract 3% GST on the full value since the precious metal coating is the dominant characteristic for classification purposes.</p>

<p>GST-registered jewellers can claim Input Tax Credit on their business purchases of gold, diamonds, and other inputs. A jeweller purchasing gold bars from a bullion dealer at 3% GST can claim that 3% as ITC against the 3% GST collected on jewellery sales. Similarly, ITC on making charges paid to job workers (if job workers are registered and charge 5% GST on their services) can be claimed. ITC on capital goods like machinery, tools, and shop equipment is also available.</p><p>The ITC chain for jewellers works as follows: purchase of gold bars at 3% GST → ITC credited → sale of jewellery at 3% on gold value plus 5% on making charges → output tax collected. Net GST remitted = output tax minus input tax credit on gold purchases. For a jeweller with significant stock purchases, the ITC on bulk gold purchases can significantly offset the output tax, particularly during periods of high turnover.</p><p>However, retail customers purchasing gold jewellery for personal use cannot claim ITC — they are not GST-registered. This means for individual consumers, the 3% GST on gold value and 5% on making charges is a final cost embedded in the jewellery price. Corporate gifting of gold jewellery by companies to employees is also not ITC-eligible as it is a personal-use gift under the blocked credit provisions. Only jewellery purchased for business purposes — display pieces, sample stock for wholesale buyers, export samples — qualifies for ITC at the business level.</p>