✓Minimal Documentation ✓Flexible Repayment ✓Collateral Free Loan | Apply for Business Loan Now! Check Eligibility

The Goods and Services Tax (GST) is a comprehensive taxation system applicable to the supply of various goods and services, including diamond jewellery. The GST rate on diamond jewellery is decided by the GST Council of India. The council revised the GST on cut and polished diamonds as recently as June, 2022.

 

Read on to find out the GST rate on diamond jewellery and all you need to know about the applicable GST rules on this gem.  

What is the Applicability of GST on Diamonds and Diamond Jewellery in India?

A complex set of rules governs the GST on diamond and diamond jewellery. Moreover, the diamond industry falls under several tax slabs. So, it is necessary to understand the applicability of GST on diamond jewellery and diamond jewellery before you decide to purchase. 

 

Check the following table to get an idea about the applicable GST rate for diamond jewellery:

Diamond Products

Applicable GST Rate

Unworked or Roughly Shaped Diamond

0.25%

Cut or Polished Diamond

1.5%

Making Charges on Diamond Jewellery

5%

Grading, Certification and Bank Charges

18%

Note: The GST rate on cut and polished diamonds has been raised from 0.25% to 1.5% following the GST order released in June 2022. 

What is the Impact of GST on Diamond Jewellery?

Before the introduction of a unified Goods and Services Tax (GST), several central and state government taxes were levied when you purchased diamond jewellery.  

 

For instance, state governments charged a Value Added Tax (VAT) ranging between 1-1.2%. However, some states, like Kerala, levied a VAT of as high as 5%. In addition, a 10% customs duty was also levied on diamond jewellery. 

 

Since the introduction of GST in 2017, a 3% charge has been levied on diamond jewellery. The GST rate for rough, unworked or sawn diamonds is 0.25%. However, diamond jewellery continues to attract an import duty of 10% even under this new tax regime.

 

Here is a table to give you a clear idea about the difference in the cost of diamond jewellery pre- and post-GST regime.

Description

Pre-GST Rate

Post-GST Rate

Base Price

₹2,00,000

₹2,00,000

Excise Duty @1%

₹2,000

-

VAT @5%

₹10,000

-

GST @3%

-

₹6,000

Final Price

₹2,12,000

₹2,06,000

So, the biggest impact of GST on diamond and diamond jewellery is that it has helped streamline taxation. Moreover, it has promoted transparency and reduced the cost of diamond jewellery in the county as the government has done away with a host of taxes. 

GST Rate and HSN code for Diamonds

HSN, or Harmonised System of Nomenclature, is a 2 to 8-digit code meant for classifying different products under the GST regime. Chapter 71 of the HSN code contains the code for all types of precious metals and stones, including diamonds. 

 

On the other hand, the government also uses a Service Accounting Code or SAC to compute taxation on different services. This system has been introduced by the Central Board of Indirect Taxes and Customs (CBIC). 

 

The following table contains the HSN and SAC code and applicable GST rates on different diamond jewellery and job work for diamond products:  

Diamond Products or Jewellery

HSN/SAC Code

GST Rate

Rough, unworked or sawn diamonds

7102

0.25%

Synthetic or reconstructed diamonds

7104

0.25%

Jewellery articles

7113

3%

Job work done for diamonds falling under chapter 71 in the 1st Schedule to the Customs Tariff Act, 1975 (51 of 1975), i.e., cut and polished diamonds

9988

1.5%

How to Calculate GST on Diamond Jewellery

Now that you know about different GST rates on diamond jewellery, take a look at how the GST is calculated on diamond jewellery. Before that, you must know that the GST on diamonds depends on two concepts: composite supply and mixed supply. 

 

Section 8 of the CGST/SGST Act defines composite supply as one where at least two supplies are involved, with one of them as the principal supply. The principal supply is regarded as the major supply.

The mixed supply is, on the other hand, where two separate supplies are charged the highest applicable GST tax rate.   

 

However, other than these two factors, the GST rate on diamond jewellery also depends on various other factors. Let us have a look at these: 

  • Case 1: Composite Supply

Consider the following example. If you purchase diamond jewellery studded with other precious and semi-precious stones, the sale of diamond jewellery will be considered as the principal supply.  

 

This would mean that this piece of jewellery will attract a GST of 3% under the HSC code 7113. 

  • Case 2: Mixed Supply

To understand mixed supply, suppose that a jeweller promotes the sale of diamond jewellery with the sale of a high-end watch, subject to 18% of GST. In this case, you will be charged the highest applicable GST, i.e., 18%, on the purchase of these items. 

  • Case 3: Making Charges

If the base price of diamond jewellery is ₹2 Lakhs with making charges of ₹20,000, the GST will be 3% of the total value. In such cases, diamond jewellery is considered the principal supply irrespective of whether making charges are inclusive or not. 

  • Case 4: Sale of Old Diamond Jewellery 

When a jeweller purchases old or used diamond jewellery, they are not liable to pay GST under Section 9(4) of the CGST & SGST Act. It is because this sale does not facilitate the furtherance of business. 

 

A jeweller will need to pay applicable GST if they purchase used diamond jewellery from a registered entity and re-sell it. However, they can claim an input tax credit (ITC) on such a sale. 

  • Case 5: Purchase of New Diamond Jewellery in Exchange for Old Jewellery 

If you exchange old diamond jewellery worth ₹2 Lakhs for a new piece worth ₹5 Lakhs, you will pay GST based on the new jewellery. So, in this case, a 3% GST will be payable on the purchase of ₹5 Lakhs, i.e., ₹15,000. The total amount payable will then be ₹5,15,000.

  • Case 6: Job Work for Diamond Jewellery

According to Section 2(68) of the CGST Act, job work is any process undertaken by a person on a product that belongs to the other person. So, in this case, job work refers to the work done on diamond jewellery by the worker hired by the jeweller. 

 

Job workers levy a 1.5% GST on their services when making new jewellery. However, when reworking or repairing old jewellery, they charge a GST rate of 18%

Read More

Place of Supply for Diamond Jewellery

Section 10 of the IGST Act, 2017 states it as the location where the movement of a particular good terminates for its final delivery. According to the act, the final recipient renders the tax on the product.

 

So, a place of supply in the case of diamond jewellery would be a jewellery showroom selling diamonds. So, the showroom will charge GST on diamonds from the final recipients. Note the inter-state movement of diamonds attracts Integrated GST (IGST).

Time of Supply for Diamond Jewellery

In the context of diamond jewellery, the GST is payable either when the jeweller receives the payment or supplies the jewellery, whichever is earlier.

E-way Bill Requirement for Diamond Jewellery

As per the annexure to Rule 138(14) of the CGST Rules, 2017, there is no need to generate e-way bills for the movement of: 

  • Jewellery

  • Gems, precious metals and stones

  • Certain other articles  

Input Tax Credit Availability on Diamond Jewellery

Under the Goods and Services Tax, jewellers and diamond merchants can claim an input tax credit (ITC). They can claim ITC of all inputs, including:

  • Capital goods

  • Packing materials

 

However, inputs provided under Section 17(5) of the CGST Act, 2017 are not liable for the tax credit. You must also be aware that there is no refund on an accumulation of Input Tax Credit (ITC) under Section 54(3) of the Act. 

 

The Government of India has declared the export of precious stones, gems and jewellery as a focused area. This decision comes against the backdrop of cut and polished diamonds accounting for 66% of the total gems and jewellery exports in FY 21-22. 

 

So, it is expected that the government will streamline and rationalise GST rates on diamonds in the coming months. The hike in GST on loose diamonds that are cut and polished from 0.25% to 1.5% is a step in that direction. 

FAQs for GST on Diamond Jewellery

What is the applicable GST rate on diamonds in India?

The applicable GST rate on rough and unworked diamonds is 0.25%. On the other hand, the GST rate for cut and polished diamonds is 1.5%.

What is the GST rate on diamond jewellery?

The GST rate on diamond jewellery is 3%.

Why is GST less on diamonds?

The government has pegged the diamond GST rate at lower levels to promote ease of doing business and solve the working capital blockage. 

Does the diamond have a lower GST than gold?

The GST for gold is pegged at similar rates as diamond. The ungraded gold attracts a rate of 0.25%, while items of gold jewellery are charged with 3% GST.

Home
active_tab
Loan Offer
active_tab
Download App
active_tab
CIBIL Score
active_tab