Nipun Aggarwal
There has been a lot of confusion and multiple interpretations are doing rounds over the past few weeks in respect of the taxability of Jewellery. In the ensuing paragraphs, an effort has been made to clear the air around this issue
I. HSN and SAC Codes
Before going into the details, it is important to make a note of relevant tax rates as notified by the CBEC.
| S. No. | Particulars | HSN/ SAC Code | GST Rate |
| 1. | Rough and un-worked diamonds, precious and semi-precious stones | 7102, 7103, 7104 | 0.25% |
| 2. | Pearls, Gold, Silver, Articles of jewellery of gold, silver, etc | 7106, 7108, 7113, 7118 | 3% |
| 3. | Job work in relation to cut and polished Diamonds, plain or studded jewellery of gold, silver, etc | 9988 | 5% |
| 4. | Other professional, technical and business services (residuary clause) | 9983 | 18% |
II. Taxability of Different Transactions
For the sake of simplicity and clarity, all the possible transactions between a Jeweller and a customer and their tax implications under the GST regime are listed below.
1. Customers walks into a Jeweller showroom and buys a Gold ornament worth Rs. 1,00,000
The Jeweller will charge GST @ 3% on Rs. 1,00,000. It is important to note that this supply is a composite supply as defined under section 2(30) comprising of supply of Gold ornament along with supply of ornament making services. Gold ornament being the principal supply, the entire value of taxable supply shall be charged @ 3% as per section 8 of the CGST Act.
2. Customers walks in to a Jeweller showroom and buys a Gold ornament worth Rs. 1,00,000 and the Jeweller charges separately for Gold and making charges
In this case, since the consideration for both Gold and making charges have been disclosed separately in the invoice by the Jeweller, the supplies will be taxable at their respective applicable rates, i.e. Gold @ 3% and making charges @ 18%.
It is important to note that the making charges should not be confused with the Job work in relation to Gold. 5% rate of Job work charges shall be applicable on the charges paid by the Jeweller to the Karigar (Job worker).
3. Customer gives old jewellery and in return buys a Gold ornament worth Rs. 1,00,000
The old jewellery given by the Customer does not constitute supply under GST law. As per section 7 of the CGST Act, one of the essential elements of supply is furtherance of business of the person making the supply. In the instant case, sale of personal jewellery by a customer does not constitute furtherance of business by the customer.
Further, as per notification no. 10/2017 (CT and UT Act), dated 28 June 2017, local purchase of second hand goods by a registered dealer (Jeweller in this case) is exempt from tax provided the dealer pays tax at the time of resale on the value determined as per Valuation rules.
As regards the tax on the sale of new jewellery in return for the old jewellery, same principles as discussed in cases 1 and 2 would apply.
4. Customer sells old jewellery to the Jeweller and does not buy anything in exchange
The subject transaction does not constitute supply for the reasons discussed in case 3. Accordingly, there will be no tax implications in this case.
It is important to note that in cases 3 & 4, it is desirable for the Jewellers to obtain suitable KYC documents, declaration from the customers in order to substantiate the fact that the sale of old jewellery by the customers is not in the course of business.
5. Customer owns 20 gm gold and gets a gold bangle made from the Jeweller. The Jeweller charges Rs. 5,000 as making charges from the customer and pays Rs. 2,000 to the Karigar
The supply of gold by the customer to the Jeweller for the purpose of making bangles will not fall under the definition of “Job work” under the GST Act due to the fact that the customer will be an individual who is not a registered person under the GST Act.
As per section 2(68) of the CGST Act, job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job work” shall be construed accordingly.
Therefore, the concessional rate of 5% of Job work in relation to gold shall not apply in the instant case and the Jeweller shall charge GST @ 18% on the making charges.
It is to be noted that the making charges paid by the Jeweller to the Karigar (job worker) will attract GST @ 5% under reverse charge (assuming that the Karigar is not a registered person).
III. Valuation of Old Jewellery on Sale as per Rule 32(5) of the Valuation Rules
As per Rule 32(5) of CGST Rules, 2017, the value of supply in case of a person dealing in buying and selling of second hand goods, shall be the difference between the selling price and the purchase price. However, the following conditions need to be fulfilled:
a. used goods are sold as such or after minor processing which does not change the nature of the goods
b. no input tax credit has been availed on the purchase of such goods
Therefore, in view of the above provisions, a Jeweller need not charge tax on the entire value of second hand goods. GST should be charged only on the differential value. This is based on the fundamental concept of GST that tax should be levied only on the value addition since the purchase price of the second hand goods has already suffered tax at the time of its original sale.
It must be noted that one needs to ensure that suitable documentation is maintained by the Jeweller to show that the conditions prescribed under rule 32(5) have been duly complied with. However, in cases where the old jewellery is completely remade after melting or it is not possible to substantiate that only minor processing has been done, it is advisable that the Jewellers charge GST on the entire value of old jewellery being sold.
IV. Job work procedure
There are provisions under the GST law which permit transfer of goods to the job worker on a challan (as per rule 55 of the CGST Rules) without payment of taxes. The details of the same are to be filed on a quarterly basis.
The Jewellers need to ensure that the movement of goods to/ from the job worker is strictly in accordance with the provisions of Rule 45 and 55 of the CGST Rules, 2017.
Further, in case the job-workers have a turnover of more than Rs. 20 lacs or are involved in inter-state supplies, it is mandatory for them to obtain registration under the Act. In other cases, Jewellers will be required to discharge the GST liability under reverse charge mechanism. The GST paid will be available as ITC to the Jewellers irrespective of the fact whether the GST is paid under reverse charge or collected by the job-workers.
The author is a fellow member of the ICAI and a practising Chartered Accountant based in Delhi and can be reached at 9873106233 or [email protected]
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute any professional advice or a formal recommendation. The author does not accept any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document or for any actions taken in reliance thereon. No part of this document should be distributed or copied without express written permission of the author.
Hi Nipel
What was the ITC for jeweler job workers
did he need to pay 5% only and there is no ITC to claim for him
Registered dealer (A) issue gold & alloy to Registered dealer (B) & Registered dealer (B) issue gold & alloy to karigar. How much GST should be charged by Registered dealer (B) to Registered dealer (A) on making/labour.
I am silver jewellery trader I trade in different states with stock with local retailers I have manual GST bill how can I travel with stock
Dear sir I am buy silver shop govandi but not gat bill send and shop silver rate 825 .10.g and this shop sell only 4000
gold smith do job work year 2020-2021
service charges Rs.3500000 (thirty five lakhs)
he have to take gst number or he can do with his pan number.
what is the limit for the year 2020-2021 job work (without gst number)
registered dealer to registered dealer only gold labour gst 5% is applicable or not.
can u sujust a software -wholesale jewellery-jobwork
issie/recipt, .auto tds dedution & gst.
Hi sir
I am a old gold buyer who buys scrap gold from customer and sells it to other customers as well as other Jewellers with a margin.
I am clear that there is no gst while am buying from customer as there is no furtherance of business in this transaction.
1. When I sell those old gold ” provided the old gold in salable condition ‘ to consumers should I charge 3% gst on whole value of gold or should I charge 3% on my margin ie 3%(selling price – purchase price)
2. When i sell those old gold to Jewellers, how to calculate gst for this transaction and who should pay gst.
as gold wholesale we need good software imprementing auto TDS, GST .IF ANY SOFTWARE PLEASE INFORM US..IF U HAVE ANYTHING WE CAN BUY.
Thanks a lot Mr. Nipun. This article is very helpful to me in understanding this sector
Sir
one party work is job work he is registered in gst(repairing work) and he is recd. the amount of job work head pls guide the gst rate on job work charges recd. and the gst is rcm or not because the customer is not resisted
I have textile business,
For gift purpose ( expense for the business )
if I purchase Gold, Can I Claim ITC for that ?
Is there any limitation of amount ?
hii sir can we claim ITC on gold purchase please provide the relevant section
Hi our Client is Gold and Jewellery shop he is apply Composite So He is eligible or Not Eligible ?
In diamond jewellery Many bussiness men want Gold Rate,Diamond Rate and There Differant Value show in invoice ….Give this tyoe invoice in Bill.
sir please provide latest information and update tax rates,etc for jewellery business
Sir my self Anjani
I started a small jewellery business with 12~ 15 lacs turnover.
Composition scheme will benificial for me or normal gst.
HSN code for making charges
Myself bimalendu samanta a gold smith (jewellery making karigar)
I have doing my work as job work besic, like any jewellery shop in kolkata give me order to make some gold necklace and they give me the raw gold too..
And after making we are getting some making charges for this work..
Like we make 100gms of gold necklace and we charges making rs 100per gram so our making will be 100gm necklace * 100 rs per gram = rs 10,000/-
and party give me this ammount of making after cutting TDS to my bank..
So sir my quiry is that is Goldsmith are required to take G.S.T number for this kind of job work ????
& further what is the income tax implication for the delars who gives pure raw gold to be converted to Articles????
THERE IS SOME MISTAKE IN YOUR UNDERSTANDING, THERE CANOT BE 2 DIFFERENT FOR MAKING CHARGES FOR THE SAME ITEM
Hi Mr. Nipun,
As SAC code 9988 is not in the GST portal. Which code to choose instead of that for the mentioned service –
“Job work in relation to cut and polished Diamonds, plain or studded jewellery of gold, silver, etc”
Hi mr Nipun,
My name is rakesh. I want to know that if a customer sells jewellery worth 1 lakh and the same amount is taken in as advance for an jewellery to be made to order. What will be the GST APPLIED ON… I raise one URD PURCHASE INVOICE AND OTHER ADVANCE RECEIPT OF SAME AMOUNT???
sir, if I raise a invoice in which i show the value of a gold ornament rs.10000/- and charge rs. 500/- as making charge. then how much gst should i charge?
Sir do jewellers have to pay GST on reverse charge on gold purchased from customers?
Hi Nipun,
My name is Anuj and I (Proprietor) am operating a small jewellery shop. Most of our jewellery items are made by our Karigar but we also sell jewellery purchased from wholesalers.
I want to register (New Registration) in GST and I have 25-30 lacks turnover.
I have some queries:
1. Whether I come in manufacturing or Retail.
2. Is composition scheme available for Jewelers?
3. What documents I need to register in GST?
Thanks,
Anuj
9540595187
Sirji,
I m doing computer embroidery job work on Sarees
And fabric. can you guide me what is Sac code and
Tax rate, thanks