Gold holds a uniquely significant position in Indian culture and finance. India is the world’s second-largest consumer of gold, with millions of transactions happening annually across retail jewellery shops, bullion traders, and import businesses. Naturally, the GST implications on gold are among the most searched topics on Indian tax portals. Whether you are a jeweller, a consumer buying a necklace, or an importer of gold bars, this guide covers everything you need to know about GST on gold and jewellery in 2025.
GST Rate on Gold: The Complete Breakdown
GST on gold is applied in a two-layer structure. The tax treatment differs for the gold as a raw material versus the finished jewellery:
| Item | GST Rate |
|---|---|
| Gold (raw, bars, coins) | 3% |
| Silver | 3% |
| Platinum | 3% |
| Gold jewellery (full value, including making charges) | 3% |
| Job work on customer-owned gold/silver (SAC 9988) | 5% |
| Cut & polished diamonds | 1.5% |
| Rough diamonds | 0.25% |
| Customs Duty on imported gold | 6% (5% BCD + 1% AIDC since July 2024, separate from GST) |
The critical point to understand here is that the GST on a ready jewellery purchase is a flat 3% on the full invoice value. The making charges are part of the value of the jewellery, so they are taxed at the same 3%:
- 3% GST on the gold value (the value of the gold content at market price)
- 3% GST on the making charges (the labour and craftsmanship fee charged by the jeweller)
The 5% rate applies only to job work (SAC 9988), where a goldsmith or karigar works on gold or silver owned by someone else, for example when you hand over your own gold to be made into jewellery and pay only for the labour.
Practical Example: Buying a Gold Necklace
Suppose you are buying a 10-gram gold necklace when gold is priced at ₹6,500 per gram:
| Component | Value | GST Rate | GST Amount |
|---|---|---|---|
| Gold Value (10g × ₹6,500) | ₹65,000 | 3% | ₹1,950 |
| Making Charges | ₹5,000 | 3% | ₹150 |
| Total Invoice | ₹70,000 | ₹2,100 |
The total GST burden on this purchase is ₹2,100 (exactly 3% of the ₹70,000 value). The jeweller is required to issue a GST-compliant invoice clearly bifurcating the gold value, making charges, and the respective GST amounts.
GST on Old Gold Exchange (Part-Exchange Transactions)
One of the most nuanced scenarios is when a customer brings in old jewellery to exchange for new jewellery (a common practice in India). The GST treatment here is a common source of confusion and litigation.
Scenario: Customer brings old gold worth ₹30,000 and buys new jewellery worth ₹70,000 (gold: ₹60,000, making: ₹10,000). Customer pays the balance of ₹40,000.
As per CBIC clarification, GST is applicable on the full invoice value of the new jewellery (₹70,000), not just on the net cash payment (₹40,000). The old gold exchange is treated as a separate supply of goods by the customer to the jeweller, and that reverse transaction also has GST implications.
Jewellers should ideally issue two separate documents:
- Invoice for new jewellery (full GST on ₹70,000 value)
- A purchase voucher for the old gold received from the customer (valued at ₹30,000, with applicable GST)
This treatment prevents any allegation of tax evasion on the gross transaction value.
Can Jewellers Claim ITC on Gold Purchases?
This is a crucial question for the jewellery trade. The answer is: Yes, jewellers can claim ITC on most inputs, but with important restrictions.
A jeweller registered under GST can claim ITC on:
- Gold and silver purchased from registered bullion dealers
- Tools, equipment, and machinery used in jewellery making
- Packaging materials
- Professional services (CA, legal)
However, jewellers CANNOT claim ITC on:
- Gold purchased from unregistered suppliers (a very common scenario, especially for old gold)
- Any inputs related to stock in trade before GST registration date
The restriction on ITC from unregistered suppliers is a significant practical issue for the jewellery industry, as a substantial portion of gold in the supply chain comes from individuals, temples, or informal recyclers who are not GST registered.
GST on Import of Gold
Gold imported into India is subject to multiple levies:
- Basic Customs Duty (BCD): 5% (cut from 10% in July 2024)
- Agriculture Infrastructure Development Cess (AIDC): 1%
- IGST: 3%
- Social Welfare Surcharge: Applicable on BCD
With 3% IGST on top of customs duty, the total tax on imported gold is roughly 9%. Customs rates change through Budget notifications, so check the current rate before importing. The IGST paid at customs can be claimed as ITC by the importer (if they are a GST-registered business entity).
HSN Code for Gold & Jewellery
For GST compliance, jewellers must use the correct HSN codes on their invoices:
| HSN Code | Description |
|---|---|
| 7108 | Gold (including gold plated with platinum), unwrought, semi-manufactured or in powder form |
| 7113 | Articles of jewellery and parts thereof, of precious metal |
| 7114 | Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal |
Use our HSN Code Lookup tool to find the exact 8-digit HSN code for specific gold articles.
Composition Scheme for Jewellers
Small jewellers with an annual turnover of up to ₹1.5 Crore can opt for the Composition Scheme and pay a flat 1% tax (as a manufacturer) without the complexity of ITC reconciliation. However, composition dealers cannot issue tax invoices, cannot charge GST from customers, and cannot supply interstate.
For most jewellers, given the high value of transactions, the regular GST scheme is more practical.
Key Compliance Points for Jewellery Businesses
- Mandatory Invoice: For any supply above ₹200 to an unregistered buyer, a proper invoice (or bill of supply for composition dealers) must be issued.
- PAN for High-Value Transactions: Any sale of jewellery exceeding ₹2 Lakhs to a single buyer requires the buyer’s PAN card details to be recorded.
- Hallmarking: From July 2021, BIS hallmarking is mandatory for gold jewellery. Hallmarked jewellery has a unique HUID number, which should also be mentioned on invoices.
Conclusion
GST on gold in India has brought unprecedented transparency to a sector that was historically cash-dominated. For consumers, it means predictable pricing with clear tax breakdowns. For jewellers, it means ITC benefits on most purchases, though the large informal sector remains a complication. If you are a jeweller wanting to calculate your GST liability quickly, use our GST Calculator for instant tax computation.