GemsPrecious Metals

GST on Gems & Precious Stones — Gold 3%, Diamonds 0.25%/1.5%, Stones 0.25%

Complete GST guide for gems & jewellery: gold/silver/platinum 3%, diamonds rough 0.25% and polished 1.5%, precious stones 0.25%/1.5%, making charges 5%, imitation jewellery 18%, old gold exchange rules, Surat diamond industry, lab-grown diamonds, and jewellery export zero-rating.

3%

Gold (bars, coins)

3%

Gold Jewellery

0.25%

Diamonds (rough)

1.5%

Diamonds (polished)

3%

Silver (bars, coins)

0.25%

Precious Stones

18%

Imitation Jewellery

5%

Making Charges

Gems & Precious Stones — GST Framework

Gold & Gold Jewellery — 3% GST

GOLD RATES: Gold bars/coins/biscuits: 3% GST (HSN 7108). Gold jewellery (studded or plain): 3% (HSN 7113). Gold findings (chains, clasps, blanks): 3%. Gold articles (idols, plates, coins): 3%. MAKING CHARGES: Making charges (job work on gold): 5% GST. This is SEPARATE from gold value. Example: Gold ring — Gold value: ₹50,000 × 3% = ₹1,500 GST. Making charges: ₹5,000 × 5% = ₹250 GST. Total GST: ₹1,750. HOW JEWELLERS BILL: Option 1 (common): Single invoice — composite supply. Total value = gold + making charges. GST = 3% on total (if making charges not shown separately). Option 2 (correct legally): Split invoice — gold at 3%, making charges at 5%. Most jewellers use Option 1 (simpler, customer-friendly). HALLMARKING: Hallmarking charges: 18% (testing/assaying service). BIS hallmarking now mandatory for 14/18/22 karat. Jeweller pays hallmarking fee + 18% GST (passes to customer as part of MRP). GOLD IMPORTS: Basic Customs Duty: 6% (reduced from 15% in Budget 2024). AIDC (Agriculture Infrastructure Development Cess): 5%. IGST: 3%. Total import duty: ~14% on gold imports. India imports 700-800 tonnes/year (~₹3.5-4 lakh crore). OLD GOLD EXCHANGE: Customer gives old gold → gets new jewellery. GST on EXCHANGE VALUE (net): Only on difference paid by customer. If old gold ₹40,000, new jewellery ₹60,000 → GST on ₹20,000 (+ making charges). Second-hand goods: Rule 32(5) — tax on margin (selling price - purchase price).

Diamonds — 0.25% (Rough) / 1.5% (Polished)

DIAMOND RATES: Rough diamonds (uncut, unpolished): 0.25% (HSN 7102). Cut and polished diamonds: 1.5% (HSN 7102). Diamond jewellery: 3% (HSN 7113 — same as gold jewellery). WHY LOW RATES: (1) Diamond industry is HIGHLY export-oriented (India cuts 90% of world's diamonds). (2) High value, low margin business — 18% would kill working capital. (3) Pre-GST: diamonds were exempt from excise + low VAT. (4) Surat diamond hub employs 1 million+ workers — political sensitivity. ROUGH TO POLISHED CHAIN: Rough diamond imported (0.25% IGST) → Cut/polished in Surat (value addition) → Sold domestically (1.5%) or exported (zero-rated). IMPORT: Rough diamonds: 0.25% IGST + nil customs duty. Major sources: Botswana, Russia, South Africa, Congo. Import hub: Mumbai (GJEPC certified). SURAT CUTTING INDUSTRY: Surat processes 90% of world's diamonds (by volume). 8,000+ cutting units, 1 million+ workers. GST at 0.25% (rough) and 1.5% (polished): keeps India competitive vs Antwerp, Tel Aviv, Dubai. If higher GST: diamond cutting would shift to UAE/Belgium. JOB WORK ON DIAMONDS: Cutting/polishing job work: 5% (service on goods). Assorting/grading: 5%. Setting in jewellery: 5%. SYNTHETIC DIAMONDS (Lab-Grown): Same HSN as natural diamonds: 7104 (synthetic). GST: 1.5% (polished synthetic). India growing in lab-grown diamond manufacturing (Surat). Customs duty on lab-grown: same as natural. CERTIFICATION: GIA/IGI/HRD certification: 18% (professional service). Diamond testing/grading: 18%.

Silver & Platinum — 3% GST

SILVER: Silver bars/coins: 3% (HSN 7106). Silver jewellery: 3% (HSN 7113). Silver articles (utensils, idols): 3% (HSN 7114). Silver findings: 3%. PLATINUM: Platinum bars: 3% (HSN 7110). Platinum jewellery: 3% (HSN 7113). Palladium/rhodium: 3% (same chapter 71). SILVER IMPORTS: Customs duty: 6% (same as gold — reduced in 2024). AIDC: 5%. IGST: 3%. Total: ~14%. India imports ~8,000-10,000 tonnes silver/year. SILVER vs GOLD — KEY DIFFERENCES: Both 3% GST — same rate. But silver is BULKIER (lower value per gram). Storage/logistics cost higher relative to value. Hallmarking: NOT mandatory for silver (optional BIS). MORE SILVER PRODUCTS: Silver-plated items: 18% (base metal + silver coating — not 'silver article'). German silver (nickel alloy, no actual silver): 18%. Silver filigree (Cuttack specialty): 3% (it's silver article). Oxidized silver jewellery: 3%. Silver thread (zari): 5% if real silver, 12% if imitation. PLATINUM GROUP METALS: Platinum: 3%. Palladium: 3%. Rhodium: 3% (used in catalytic converters). Iridium/Osmium/Ruthenium: 3% (rare, specialized). BULLION DEALERS: Bullion = gold/silver in bar form for investment. Bullion trading: 3% on each sale. High value, low margin — ₹1 crore gold bar → ₹3 lakh GST. Dealers operate on 0.5-1% margin → GST (3%) exceeds margin! Solution: many trade on 'principal-to-principal' basis (not commission). E-INVOICING: Gold/silver dealers > ₹5 crore: mandatory e-invoicing. E-way bill: gold transport requires special provisions (armed security). Threshold: ₹50,000 — easily crossed with gold (1 gram = ₹6,000+).

Precious & Semi-Precious Stones — 0.25% / 1.5%

PRECIOUS STONES: Ruby (rough): 0.25% (HSN 7103). Emerald (rough): 0.25%. Sapphire (rough): 0.25%. Ruby/Emerald/Sapphire (cut & polished): 1.5%. SEMI-PRECIOUS STONES: Amethyst, garnet, topaz, tourmaline (rough): 0.25%. Cut & polished semi-precious: 1.5%. Pearls (natural): 0.25% (HSN 7101). Pearls (cultured): 0.25%. SYNTHETIC STONES: Synthetic ruby/sapphire/emerald: 1.5% (HSN 7104). Cubic zirconia (CZ): 18% (HSN 7104 — classified differently in some rulings). Moissanite: 18% or 1.5% (dispute — depends on classification). JAIPUR — GEMSTONE HUB: Jaipur processes 90% of India's colored gemstones. 500,000+ workers in stone cutting/polishing. Exports: ₹15,000+ crore/year (emeralds, rubies, tanzanite). GST at 0.25%/1.5%: maintains competitiveness vs Thailand, Sri Lanka. GEMSTONE IMPORT: No customs duty on rough precious/semi-precious stones. IGST: 0.25% (rough), 1.5% (polished). Import sources: Colombia (emerald), Myanmar (ruby), Sri Lanka (sapphire). CORAL: Red coral: 0.25% (rough) / 1.5% (polished). Coral bead necklaces: 3% (if set in precious metal) or 1.5% (loose). PEARLS — SPECIAL CASE: Natural pearls: 0.25% (very rare, expensive). Cultured pearls (Hyderabad specialty): 0.25%. Pearl stringing/threading: 5% (job work). Pearl jewelry: 3% (set in gold/silver). VALUATION CHALLENGES: Gemstones: no 'MRP' — value is subjective. Valuation for GST: transaction value (what's actually paid). Disputes: department may challenge declared value if 'abnormally low'. Gemstone appraisal: not standardized like diamond (4Cs). Relies on expert opinion — scope for under-invoicing concerns.

Jewellery Manufacturing & Job Work

JOB WORK IN JEWELLERY — 5%: All job work on precious metals/stones: 5% GST. Includes: Gold smithing (making ornaments): 5%. Diamond setting: 5%. Polishing/finishing: 5%. Rhodium plating: 5%. Stone cutting: 5%. Engraving: 5%. Enameling (Meenakari — Jaipur): 5%. Kundan setting: 5%. PRINCIPAL-ARTISAN MODEL: Jeweller (principal) gives gold + stones to artisan (job worker). Artisan makes ornament → returns to jeweller. GST: 5% on making charges ONLY (not on gold value). Gold sent for job work: NO GST on movement (challan-based). Time limit: 1 year to return (extendable). If not returned in 1 year: deemed supply → 3% GST on gold value. KARIGARS (ARTISANS): Most karigars are unregistered (below ₹20 lakh threshold). If unregistered artisan does job work for registered jeweller: Jeweller must pay GST under REVERSE CHARGE? NO — job work by unregistered person: NO RCM (RCM only for specified services). So: small artisan below threshold → no GST collected, no RCM. LARGE MANUFACTURING UNITS: Tanishq (Titan), Kalyan, Malabar Gold: in-house manufacturing. Captive production: no job work GST (self-supply not taxable). Contract manufacturing for other brands: 5% on making charges. WASTAGE/SCRAP: Gold wastage during manufacturing: ~2-5%. Scrap gold sold: 3% GST. No ITC reversal on wastage (normal manufacturing loss). HALLMARKING INTEGRATION: BIS hallmarking: mandatory before retail sale. Hallmarking centers: charge ₹35-45/article + 18% GST. Jeweller bears cost (passes to customer in MRP). KARIGARI CHARGES DISPLAY: Consumer transparency: jewellers now display making charges separately. DFIA/advance license: for export jewellers — duty-free gold import for export production. Gold on loan (metal loan from banks): complex GST — loan of goods with return obligation.

Gems & Jewellery Exports — Zero-Rated

INDIA'S GEM & JEWELLERY EXPORTS: Total exports: ₹2.5-3 lakh crore/year (India's #1 or #2 export sector). Composition: Cut/polished diamonds: ~60%. Gold jewellery: ~25%. Colored gemstones: ~10%. Silver jewellery: ~5%. EXPORT PROCEDURE: (1) Register with GJEPC (Gem & Jewellery Export Promotion Council). (2) Obtain LUT for zero-rated supply. (3) Export against LUT → claim ITC refund. (4) Or: pay IGST on export → auto-refund via shipping bill. SPECIAL PROVISIONS: (A) NOMINATION SCHEME: Nominated agencies (MMTC, SBI, PNB) import gold for jewellers. Supply by nominated agency to exporter: 3% GST. Exporter: claims ITC refund on export. (B) DUTY-FREE IMPORT: Advance Authorization/DFIA: import gold duty-free for export production. Obligation: export within stipulated time. No IGST on duty-free imports (Notification 78/2017). (C) PERSONAL CARRIAGE: Gem & jewellery can be exported by PERSONAL CARRIAGE (hand-carry). Valuation: declared at airport customs. Used for high-value diamond parcels (Surat → Antwerp/Dubai). (D) EXHIBITION ABROAD: Jewellery sent abroad for exhibition: temporary export. No GST (goods returning within 6 months). If sold at exhibition: zero-rated export (shipping bill equivalent document). STAR EXPORT HOUSES: Top exporters get 'Star Trading House' status. Benefits: faster customs clearance, self-certification for origin. No additional GST benefit (zero-rating is universal for exports). DUBAI/UAE COMPETITION: Dubai: 5% VAT (not on gold bullion — exempt). UAE Free Zones: completely tax-free for re-export. India's advantage: skilled labour (cutting/polishing). India's disadvantage: 3% GST on domestic movement + compliance cost. BHARAT DIAMOND BOURSE (BDB): Mumbai — world's largest diamond bourse. B2B diamond trading: 1.5% on each transaction. Multiple trades before export: GST accumulates (0.25% + 1.5% + 1.5%...). Industry demand: 'Special Economic Zone' status for BDB to avoid cascading.

Gems & Jewellery — GST Rate Table

ItemHSNGST RateNotes
Gold (bars, coins, biscuits)71083%All forms of gold bullion
Gold jewellery (plain/studded)71133%Includes making charges if not split
Making charges (job work)99885%Goldsmithing, setting, polishing
Silver (bars, coins, articles)7106/71143%All silver products
Platinum / palladium71103%All platinum group metals
Rough diamonds71020.25%Uncut, unpolished
Cut & polished diamonds71021.5%Includes lab-grown
Rough precious stones71030.25%Ruby, emerald, sapphire
Polished precious stones71031.5%Cut & polished
Natural / cultured pearls71010.25%All pearl types
Imitation jewellery711718%Base metal, glass stones
Hallmarking / certification998318%BIS, GIA, IGI services

Frequently Asked Questions

Why is gold taxed at only 3% GST when most goods are at 18% or 28% — what's the logic?
GOLD AT 3% — THE POLITICAL & ECONOMIC LOGIC: WHY NOT 18% OR EVEN 12%: (1) SMUGGLING RISK: Gold is compact, high-value, easily smuggled. Pre-1991: gold import was banned → massive smuggling (hawala + Dubai gold). Every 1% increase in gold tax = ₹2,000-3,000 increase per 10 grams. At 18% GST: gold would cost ₹11,000 MORE per 10 grams (at ₹60,000/10g). Smuggling becomes profitable at 5-6% differential vs neighboring countries. India already has porous borders (Nepal, Myanmar, Sri Lanka). (2) INVESTMENT ASSET: Gold is savings/investment for 70% of Indian households. Rural India: gold = bank account (store of value). Taxing at 18% = penalizing savings of poor and middle class. (3) WEDDING DEMAND: Indian weddings: ₹2-5 lakh gold purchase (average). 18% GST on wedding gold = ₹36,000-90,000 additional cost. Politically suicidal for any government. (4) INDUSTRY EMPLOYMENT: 5 million+ employed in gold/jewellery manufacturing. Higher GST → higher prices → lower demand → job losses. (5) INFORMAL ECONOMY: Pre-GST: gold had 1% excise + 1-5% VAT = 2-6% total. GST at 3% = roughly same as pre-GST level. Higher rate: would push transactions back to cash/informal. (6) REVENUE CALCULATION: Gold at 3%: ₹60,000 × 3% = ₹1,800 per 10 grams. India consumes 700-800 tonnes/year = ~₹14,000-16,000 crore GST revenue. If 18%: theoretical revenue ₹84,000 crore. But: consumption would fall 40-50% + smuggling + informal. Actual revenue at 18%: probably ₹30,000-40,000 crore (less than expected). NET ASSESSMENT: 3% is OPTIMAL — maximizes compliance, minimizes smuggling, protects employment. Finance Ministry internal papers reportedly considered 5% but settled on 3%.
How does the old gold exchange system work for GST — and what about gold savings schemes?
OLD GOLD EXCHANGE — GST TREATMENT: THE TRANSACTION: Customer brings old gold ornament (say 20 grams). Jeweller gives new ornament (say 25 grams). Customer pays difference in value + making charges on new ornament. GST CALCULATION (Rule 32(5) — second-hand goods NOT applicable here): Old gold exchange is NOT 'purchase of second-hand goods'. It's: (a) Purchase of old gold by jeweller, AND (b) Sale of new jewellery to customer. TWO SEPARATE TRANSACTIONS: Transaction 1: Jeweller BUYS old gold from customer. Customer is UNREGISTERED → no invoice from customer. Jeweller issues PURCHASE VOUCHER (self-invoice). Value: based on purity testing (XRF machine). No GST payable BY CUSTOMER (unregistered seller selling personal jewellery — no GST on individual selling personal effects). Transaction 2: Jeweller SELLS new jewellery to customer. GST: 3% on FULL value of new jewellery. Making charges: 5% GST. NET EFFECT: Customer pays: (New jewellery value − Old gold credit) + Making charges. GST calculated on: FULL new jewellery value (not just the difference). EXAMPLE: New gold chain: ₹2,00,000 (25g). Old gold value (after purity test): ₹1,50,000 (20g). Making charges: ₹15,000. Customer pays: ₹2,00,000 − ₹1,50,000 + ₹15,000 = ₹65,000 (net cash). GST on new chain: 3% × ₹2,00,000 = ₹6,000. GST on making: 5% × ₹15,000 = ₹750. Total GST: ₹6,750. Credit given for old gold: ₹1,50,000 (no GST deducted from this). GOLD SAVINGS SCHEMES: Tanishq Golden Harvest, Malabar Gold Plan, etc. Customer pays monthly installment (₹5,000/month × 11 months). 12th month: jeweller adds bonus (equivalent to 1 month). Total corpus: ₹60,000 (₹55,000 paid + ₹5,000 bonus). GST: (a) Monthly payments: NOT ADVANCE for supply → no GST at time of payment. (b) GST arises when jewellery is ACTUALLY PURCHASED using the corpus. (c) At redemption: 3% on jewellery value purchased. BONUS AMOUNT: Is the bonus taxable? Jeweller's perspective: promotional expense (cost of scheme). Customer's perspective: discount on purchase. Likely treatment: 3% on net purchase price (after applying bonus as discount). DIGITAL GOLD (PhonePe, Google Pay, Paytm): Purchase of digital gold: 3% GST (gold purchase). Storage/locker charges: 18% (service). Redemption as physical gold: no additional GST (already paid at purchase). Selling digital gold back: 3% on sale value (by the platform/vault). SGB (Sovereign Gold Bonds): Not 'goods' — they're securities. No GST on purchase/sale of SGBs. Interest on SGBs: not a supply of goods/service → no GST.
How does GST work for the Surat diamond cutting industry — and what about lab-grown diamonds?
SURAT DIAMOND INDUSTRY — GST MECHANICS: INDUSTRY OVERVIEW: Surat cuts/polishes 90% of world's diamonds (by piece count). 8,000+ factories, 1 million+ workers (artisans). Annual turnover: ₹1.5-2 lakh crore (domestic + export). Mostly MSME/family-owned units. THE CHAIN: (1) Rough diamonds imported from De Beers (Botswana), ALROSA (Russia), Rio Tinto. (2) Import: 0.25% IGST on rough diamonds (no customs duty). (3) Surat factories: cut, polish, grade. (4) Polished diamonds sold domestically (1.5%) or exported (zero-rated). GST ON JOB WORK: Most Surat units work on JOB WORK basis: Large traders (sightholders) own the rough. Give to cutting units for processing. Cutting/polishing charges: 5% GST. Return polished diamonds to trader: no GST on diamond value (it's the trader's goods). Trader sells polished: 1.5% (domestic) or 0% (export). MULTIPLE TRADES BEFORE EXPORT: Rough imported → 0.25%. Sold to trader A → 0.25% (rough trade). Trader A to Surat unit (job work) → 5% on charges. Polished sold by trader A to trader B → 1.5%. Trader B to exporter → 1.5%. Exporter ships abroad → 0%. Cascading: 0.25% + 5%(charges) + 1.5% + 1.5% = multiple GST hits before export. Industry complaint: compared to Dubai (no VAT on diamonds in free zones). STAR DIAMOND TRADING BOURSE: Surat Diamond Bourse (world's largest): opened 2023. B2B trades within bourse: 1.5% on each transaction. Industry demand: SEZ status to eliminate intra-bourse GST. LAB-GROWN DIAMONDS (LGD): India is becoming LGD manufacturing hub (Surat again). GST on LGD: same as natural — 1.5% (polished), 0.25% (rough). HSN 7104 (synthetic/reconstructed gemstones). Growth: India exported ₹12,000+ crore LGD in FY24. Manufacturing: CVD (Chemical Vapor Deposition) machines imported at 18% GST + customs duty. LGD raw material (diamond seed/substrate): 0.25% or 1.5% depending on classification. SURAT UNIT COMPLIANCE: Many small units (₹20-50 lakh turnover): below registration threshold if ONLY doing job work within Gujarat. But: most deal interstate (Mumbai traders) → registration mandatory. QRMP scheme (quarterly returns): helpful for small diamond processors. Digital payment push: most Surat trades now via RTGS/banking (reduced cash).
What about imitation jewellery — how is it different from precious jewellery for GST purposes?
IMITATION vs PRECIOUS JEWELLERY — GST CLASSIFICATION: IMITATION JEWELLERY: 18% GST (HSN 7117). Made from base metals (copper, brass, iron, zinc) with coating. Set with synthetic/glass stones (not real gems). Includes: Fashion jewellery, costume jewellery, artificial necklaces, oxidized jewellery (if base metal), temple jewellery replicas (brass/copper). PRECIOUS JEWELLERY: 3% GST (HSN 7113). Made from precious metals (gold, silver, platinum). Set with natural/cultured gemstones and diamonds. KEY DIFFERENCE: The METAL determines the rate, not the design or price. Gold-plated copper bangle: 18% (base metal = copper). Silver bangle with no stones: 3% (precious metal = silver). ₹500 real gold nose pin: 3%. ₹50,000 imitation diamond necklace (brass + CZ): 18%. CLASSIFICATION DISPUTES: (1) Gold-plated jewellery: Base metal + thin gold plating → 18% (HSN 7117 — imitation). UNLESS: gold content exceeds prescribed threshold → then HSN 7113 (3%). (2) Silver-plated jewellery: Brass + silver plating → 18%. Solid silver with rhodium plating → 3% (base is precious). (3) Kundan jewellery: Real gold + glass stones (traditional Rajasthani): 3% (gold base). Imitation gold + glass stones: 18%. (4) Meenakari: Gold with enamel work: 3% (gold base). Brass with enamel: 18% (base metal). RAJKOT/AHMEDABAD IMITATION JEWELLERY: Rajkot: India's largest imitation jewellery hub. 10,000+ units, ₹15,000+ crore industry. Mostly brass/copper base with gold/rhodium plating. Pre-GST: 1% excise (SSI exemption for most). Post-GST: 18% — MASSIVE impact on industry. Industry demanded 5% or 12% — rejected. IMPACT OF 18%: (a) Price increase: ₹500 necklace → ₹590 (₹90 GST). (b) Compliance burden: small units (₹10-50 lakh) now need registration. (c) ITC benefit: input brass (18%), chemicals (18%), labour → ITC flows at 18% (no inversion). (d) Export advantage: zero-rated — Indian imitation jewellery exports competitive. COMPOSITION SCHEME: Small imitation jewellery makers (< ₹1.5 crore): 1% composition tax. Many Rajkot units prefer composition (simple compliance). Trade-off: no ITC, no interstate supply. MIXED SUPPLY (PRECIOUS + IMITATION): Gift set: 1 gold ring + 1 imitation necklace sold together. If sold as PACKAGE: mixed supply → highest rate (18%). If sold as SEPARATE items: gold ring 3%, imitation necklace 18%. Jewellers: always sell separately on invoice to apply correct rates.

Gems & Jewellery GST — Gold Exchange, Diamond Trading & Export Compliance

Laabam.One handles gems & jewellery GST: 3% gold/silver invoicing, old gold exchange accounting, making charges at 5%, diamond 0.25%/1.5% tracking, hallmarking cost integration, export LUT for GJEPC members, lab-grown diamond classification, and imitation jewellery 18% compliance.

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