GST on Jewellery: Comprehensive Guide

[Tushar Malik]

GST Rate on Jewellery

• The GST rate on jewellery is 3%, which includes both the making charges and the cost of the materials used.
• This rate applies to gold jewellery, silver jewellery, and ornaments made of other precious metals.

Composite Supply and GST Rate

• As per Section 8 of the CGST Act, selling gold ornaments or jewellery is classified as a composite supply of goods and services. The gold used is considered as goods, and the making charges represent job work.
• Since the principal supply is the sale of gold, the GST rate of 3% is levied on the total value of the jewellery, regardless of whether the making charges are shown separately. This clarification has been provided by the CBIC in its sectoral FAQs.

Input Tax Credit (ITC) for Jewellery Manufacturers

• ITC on Raw Materials: Jewellery manufacturers can claim ITC on raw materials like gold, silver, and other inputs used in jewellery production.
• ITC on Capital Goods: ITC can also be claimed on machinery and other capital goods used in jewellery manufacturing.

GST on Digital Gold Purchase

• The same GST rate of 3% applies to the purchase of digital gold.

Valuation of Jewellery for GST

• GST is levied on the total value of the supply, which includes the cost of materials (e.g., gold, silver) and making charges.
• If making charges are stated separately, GST is calculated on the combined total of materials and making charges.

GST on Job Work in the Jewellery Industry

Definition of Job Work in Jewellery

• Job work involves the processing of goods (e.g., polishing, stone setting, finishing) that belong to another person (the principal).
• The job worker processes the goods according to the principal's specifications and returns the finished product.

GST Rate on Job Work

• The GST rate for job work services in the jewellery sector is 5%, as specified in Notification No. 20/2017-Central Tax (Rate), dated 22nd August 2017.

ITC for Job Work

• The principal can avail of ITC on the GST paid to the job worker for their services.
• Job workers can avail of ITC on inputs used for processing, provided these inputs are used for the principal's business.

Key Compliance and Considerations Under GST

E-Way Bill Requirements

• As per Notification No. CGST 38/2023, dated 4th August 2023, anyone transporting gold and precious metals worth ₹2 lakh or more within a state must generate an e-way bill, subject to state/UT GST laws.

Movement of Goods for Job Work

• Goods can be sent to job workers without paying GST if they meet certain conditions:
  • Goods must be returned within one year (for inputs) or three years (for capital goods).
  • If goods are not returned within the stipulated time, GST will apply, and the principal must pay tax on the goods.

Waste and Scrap

• Any waste or scrap generated during jewellery manufacturing belongs to the principal unless otherwise agreed.
• The disposal of such scrap must comply with GST provisions, and the principal is liable for the tax arising from its sale.

GST Registration Requirements

• Businesses involved in the supply, manufacturing, or sale of jewellery or precious metals must register under GST if their turnover exceeds the prescribed limit.
• Job workers must also register for GST if their turnover exceeds the prescribed limit.

Conclusion

The GST regime has streamlined taxation in the jewellery and precious metals industries. By understanding these provisions, businesses can ensure compliance and manage their tax obligations efficiently.

It is crucial for jewellery manufacturers, traders, and job workers to stay updated with any amendments to GST laws as these can impact tax liabilities and compliance requirements. Consulting a GST expert can help businesses navigate the complexities of the regime and remain compliant with the law.