GST on Jewellery Explained: 3% Tax, Making Charges, and Old Gold Melting Deductions
Published by Sarafa Technology Desk • Practical Sarafa Showroom Guide
Tax compliance in the Indian jewellery sector requires strict precision. Unlike standard retail items with single flat GST rates, jewellery sales involve precious metal valuation, artisan labor (making charges), and old gold exchange adjustments.
1. Core GST Rate Structure for Jewellery
Under HSN Code 7113, all articles of jewellery and parts thereof of precious metal (gold, silver, platinum) attract a total 3% GST:
- Intrastate Sales (within same state): 1.5% CGST + 1.5% SGST.
- Interstate Sales (to another state): 3.0% IGST.
2. Are Making Charges Taxed at 5% or 3%?
This is one of the most common points of confusion among jewellers and junior accountants:
Pure Job Work (Standalone Karigar Service): When a Karigar or workshop bills the showroom owner solely for labor/making service without selling gold, it is treated as a service under SAC 9988 and taxed at 5% GST.
Finished Jewellery Sale at Showroom Counter: When a customer buys a gold necklace from your showroom, making charges are part of a Composite Supply where the principal supply is gold. Therefore, the entire taxable value (Gold Value + Making Charges + Wastage) attracts 3% GST.
3. Old Gold Exchange (Trade-In) Tax Math
When a customer exchanges an old gold chain against a new ornament, the exchange value acts as a tender mode deduction (like cash or card) rather than a reduction in the gross taxable value of the new piece, unless operating under Rule 32(5) Margin Scheme.
Standard Invoice Formula:
Taxable Amount = Gross Ornament Value - Trade Discount
GST Output (3%) = Taxable Amount × 0.03
Grand Invoice Total = Taxable Amount + GST Output
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Less Old Gold Tender: (Old Gold Net Touch Wt × Scrap Rate)
Net Balance Payable by Customer = Grand Total - Old Gold Credit
4. Section 269ST & PAN Card Mandate
Under Section 269ST of the Income Tax Act, no person shall receive an amount of ₹2 Lakhs or more in cash in a single day or with respect to a single invoice. TolaBook includes built-in safeguards: if counter staff records a cash split of ₹2,00,000 or higher, the software requires a mandatory Customer PAN entry before allowing invoice generation.
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