New
February 9, 2023
By
Shreeja Ray

2023 GST Guide on Diamond Jewellery

The diamond and gold industries make a considerable contribution to the Indian GDP—roughly 7.5%. Additionally, it accounts for roughly 14% of all exports from the nation. Over 60 lakh people are employed directly in this sector. These stats demonstrate the importance of this sector.

On July 1, 2017, the government enacted the GST; the current administration has been in place for four years. Everyone still seems to be determining how it will affect various industries, especially small and medium business owners. In this article, we attempt to explain the GST on the gold and diamond jewelry industries.

How is GST on Diamond Jewellery Calculated?

Due to the idea of composite and mixed supply of commodities, the GST charge on diamonds and diamond jewelry becomes complex. Section 8 of the CGST/SGST Act states that

A composite supply—one that consists of at least two supplies and is recognized as the major supply—will be regarded as a supply of this principal supply as a whole.

A mixed supply that consists of at least two separate supplies will be charged the highest applicable GST rate for that specific supply.

Case 1: Composite Supply

Consider a piece of diamond jewelry with valuable stones as an example. The sale of this diamond jewelry will be classified as composite supply in this circumstance. This is so because diamonds are the main source of supplies, however some precious stones have also been provided and some job work has been done. As a result, the complete collection of diamond jewelry will be subject to the 3% GST imposed on jewelry under HSN 7113.

Case 2: Mixed Supply

Imagine that a jeweller is promoting the sale of diamond jewelry by bundling it with the sale of a costly watch during a promotional event. In this situation, the sale might meet the criteria for a mixed supply and be subject to an 18% levy (the GST rate on mixed supplies).

Valuation of Old Jewellery on Sale as per Rule 32(5) of the Valuation Rules

The value of supply in the instance of a person engaged in the buying and selling of used goods shall, pursuant to Rule 32(5) of the CGST Rules, 2017, be the difference between the selling price and the purchase price. However, the following prerequisites must be met:

1. Used items are sold in their current condition or after little processing that does not alter their character.

2. No input tax credit was used to offset the cost of the products.

Because of the aforementioned regulations, a jeweller is not required to charge tax on the full worth of used products. GST should only be applied to the difference in value. This is based on the fundamental tenet of GST, which states that just one tax should be imposed.

HSN Code for Gold & Jewellery- HSN Chapter 71

HSN chapter 71 contains the HSN code for all types of precious metals, precious stones and gold.

Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder fall are classified under HSN code 7108 as under:

1. HSN code for gold powder is 7108 11 00.

2. HSN code for other unwrought forms of gold is 7108 12 00.

3. HSN code for other semi-manufactured forms of gold is 7108 13 00

4. HSN code for monetary gold is 7108 20 00

5. HSN code for gold base metals or silver, clad with gold, not further worked than semi-manufactured is 7109 00 00

6. GST rate of 3% is applicable for all of the above HSN codes.

Conclusion

We saw significant employment losses during the GST regime's first implementation as well as the closure of numerous job-work units. Gujarat, which is the center of India's diamond industry, was at the forefront of this severe downturn. However, circumstances have now stabilized, and this business is once more experiencing rapid expansion. The Finance Ministry's numerous wise choices are largely responsible for this change.

We really hope that our thorough post on the GST on gold and diamond jewelry will help you make an informed choice when making your next purchase of gold and diamond jewelry.

FAQs

1. Will the implementation of GST have a negative impact on me as a client buying diamond and gold jewelry?

There will only be a small rise in the cost of your purchase when compared to the previous tax system and the present GST system. This is due to the GST regime absorbing all of the other levies under the previous tax system, including VAT, service tax, and others.

2. What is the GST rate on gold and diamond jewelry?

The applicable GST rate for buying diamond and gold jewelry is 3%.

3. If I purchase diamond or gold jewelry straight from a goldsmith, do I have to pay GST?

Yes. If you, as a consumer, go straight to a goldsmith and purchase diamond or gold jewelry, the impact of GST on such items will be at 5%, provided that the goldsmith is registered for GST.

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