GST Treatment for jewellers in Goldsmith Trade – A Legal Analysis of Gold Goods, goldsmith’s Services, and other Classification
Abstract
The goldsmith trade frequently encounters GST disputes not due to legislative ambiguity, but due to incorrect legal characterization of transactions. This article examines the GST implications of three commonly conflated supplies—sale of gold jewellery, sale of goldsmith wares, and making charges/job work—and highlights the importance of ownership transfer and classification in determining tax liability.
I. Introduction
In practice, jewellers often treat all transactions in the goldsmith trade uniformly. However, under the Central and State GST framework, each transaction must be independently examined based on its legal character. Failure to do so results in audit objections, show cause notices, and tax demands.
II. Sale of Gold Jewellery
Where a jeweller purchases gold, manufactures jewellery, and sells the finished product, the transaction involves a complete transfer of ownership. Such supply qualifies as supply of goods under GST and is classifiable under HSN 7113, taxable at 3% GST.
III. Sale of Goldsmith Wares
Goldsmith wares—such as pooja items, utensils, and decorative objects—do not constitute jewellery but are nonetheless goods made of precious metals. These supplies fall under HSN 7114 and attract 3% GST. Incorrect interchangeability of HSN 7113 and 7114 is a common compliance error.
IV. Making Charges and Job Work
Where gold is supplied by the customer and the goldsmith provides only labour and skill, there is no transfer of ownership. Accordingly, such activity constitutes supply of services, classifiable under SAC 998892, taxable at 18% GST. Misclassification at 3% leads to short payment of tax.
V. Invoicing and Compliance
A legally sustainable invoice must distinctly disclose:
- Value of gold as supply of goods (3%)
- Making charges as supply of services (18%)
This segregation is essential for audit defensibility.
VI. Conclusion
GST compliance in the goldsmith trade hinges on legal interpretation rather than arithmetic. Proper classification, recognition of ownership transfer, and accurate invoicing together form the foundation of sustainable compliance and risk mitigation.
Professional FAQ (Frequently Asked Questions) with practical examples
FAQ 1: Why do GST disputes arise frequently in the goldsmith trade?
Answer: Disputes arise not because the GST law is unclear, but because transactions of different legal character are treated uniformly in practice.
Example:
- A jeweller charges 3% GST on:
- Sale of jewellery, and
- Making charges on customer-supplied gold
While the tax rate appears consistent, legally one is a supply of goods and the other a supply of services, leading to audit objections.
FAQ 2: What is the key legal test to determine GST treatment?
Answer: The transfer of ownership is the decisive legal test.
- Ownership transferred → Supply of goods
- Ownership not transferred → Supply of services
Example:
If the jeweller’s gold is sold to the customer → ownership transfers → goods.
If customer’s gold is only worked upon → no ownership transfer → service.
FAQ 3: When is the sale of gold jewellery treated as supply of goods?
Answer: When the jeweller:
1. Purchases gold,
2. Manufactures jewellery, and
3. Sells the finished jewellery to the customer.
This involves complete transfer of ownership.
GST Treatment:
- HSN: 7113
- Nature: Supply of goods
- GST Rate: 3%
FAQ 4: Does the fact that jewellery is “manufactured” change GST treatment?
Answer: No. Manufacturing does not alter the nature of supply if the final product is sold with ownership transfer.
Example: Even though labour and skill are involved in making jewellery, the dominant supply is goods, not services.
FAQ 5: What are goldsmith wares and how are they different from jewellery?
Answer: Goldsmith wares are articles made of precious metals that are not jewellery, such as:
- Pooja articles
- Lamps
- Plates and utensils
- Decorative or traditional items
They are goods, but not jewellery.
FAQ 6: What is the correct GST classification for goldsmith wares?
Answer:
- HSN: 7114
- Nature: Supply of goods
- GST Rate: 3%
Example: A gold plate used for religious purposes is not jewellery even though it is made of gold.
FAQ 7: Why is wrong HSN classification risky even if GST rate is same (3%)?
Answer: Because classification is a legal requirement independent of tax rate.
Example:
- Jewellery wrongly shown under HSN 7114
- Pooja articles wrongly shown under HSN 7113
During audit, the department may:
- Treat it as misclassification,
- Question valuation and ITC,
- Initiate proceedings despite correct tax payment.
FAQ 8: What are making charges or job work under GST?
Answer: Making charges arise when:
- Customer supplies their own gold, and
- Goldsmith provides only labour, skill, and craftsmanship.
There is no sale of gold and no transfer of ownership.
FAQ 9: How are making charges treated under GST?
Answer: Making charges are treated as supply of services.
GST Treatment:
- SAC: 998892
- GST Rate: 18%
Example: Customer gives 20 grams of gold → jeweller charges ₹5,000 as making charges → GST @ 18% applies on ₹5,000.
FAQ 10: What is the most common compliance mistake regarding making charges?
Answer: Charging 3% GST instead of 18% on making charges.
Departmental View:
This is treated as:
- Short payment of tax, not tax evasion
- Attracts interest and penalty
FAQ 11: How should a legally compliant jewellery invoice be structured?
Answer: A compliant invoice must segregate goods and services clearly.
Correct Invoice Structure:
- Component Nature GST Rate
- Value of gold Supply of goods 3%
- Making charges Supply of services 18%
FAQ 12: Why is segregation in invoice critical for audit defence?
Answer: Because GST liability is determined line by line, not on the total invoice value.
Example: A single consolidated amount with 3% GST:
- Is legally weak
- Invites reclassification
- Results in tax demand on making charges at 18%
FAQ 13: Can GST compliance in the goldsmith trade be simplified?
Answer: Yes—by applying legal interpretation before tax calculation.
GST compliance succeeds when businesses focus on:
- Nature of supply
- Ownership transfer
- Correct HSN/SAC
- Clear invoicing
FAQ 14: What is the core legal takeaway for jewellers and professionals?
Answer: GST in the goldsmith trade is not arithmetic-driven but law-driven.
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