The Goods and Services Tax (GST) has changed the way taxes are levied on various goods and services in India. GST on jewellery has undergone significant changes. Let’s discuss - GST on jewellery, including the tax rates and exemptions, input tax credit, and compliance requirements.
Gold bars or
gold jewellery fall within the definition of ‘Goods’ as per the GST law.
Under
Section 7 of the CGST Act, the supply of gold (without any job work) is
considered the supply of goods.
As per
Section 8 of the CGST Act, selling gold ornaments or jewellery to the common
man is a composite supply of goods and services. The gold used is considered
goods and making charges or value addition is towards job work.
Since
the principal supply is the sale of gold, the GST rate of 3% shall be levied
instead of 5% on the total value of jewellery, whether making charges is shown
separately.
Repair
works on jewellery will be considered the making charges for which GST is
charged separately at 5%.
GST on gold in various forms is discussed at length in this article. GST
subsumed VAT, service tax, excise duty and several other indirect taxes charged
on domestic transactions. Tax on the making charges on gold jewellery was
introduced under GST. On the other hand, basic customs duty continues to be
collected on the import of gold from other countries and the levy of IGST.
The GST
registration threshold limits that commonly apply to normal taxpayers apply to businesses in
gold mining and distribution as well. Further, the composition
scheme under section 10
of the CGST Act is available to businesses selling gold.
Compliance Requirements
Jewellers are required to comply
with various GST regulations to ensure that they meet their tax obligations.
The compliance requirements for jewellers are as follows:
1.
Registration: Jewellers with an annual turnover of Rs. 40 lakhs
or more are required to register under GST.
2.
Invoicing: Jewellers are required to issue GST-compliant
invoices for all sales, including those made to unregistered persons.
3.
Filing of
Returns: Jewellers are required to file
monthly or quarterly GST returns, depending on their turnover.
4.
Maintenance
of Records: Jewellers are required to
maintain detailed records of all transactions, including purchases, sales, and
expenses.
Many gold merchants or sellers or jewellers take the services of goldsmiths and specialists who carry out job work on the gold bars or gold biscuits supplied by them to make jewellery. It is considered a supply of service.
The
goldsmiths will charge for their service known as making charges which will
attract GST of 5%.
If
these goldsmiths or specialists are not registered under GST, the gold merchant
or jeweller must pay GST at 5% on a reverse charge basis.
Consumers
who approach the goldsmiths by themselves will also have to pay 5% GST if the
goldsmith is registered under GST.
GST is not charged if unregistered
individuals sell gold jewellery or exchange gold ornaments to buy new ones at
jewellery shops. It is not considered furtherance of business and is out of the
scope of supply under GST.
However, if dealers or gold companies such as Attica Gold company,
Aashraya Gold Company, or Malappuram Gold Loan, etc. purchase and sell
second-hand gold jewellery, GST applies on the value of such gold calculated as
per the rule 32(5) of CGST Rules, after satisfying the conditions.
GST Calculations – Example
Input Tax Credit
Input Tax Credit (ITC) is a mechanism that allows businesses to claim
credit for the GST paid on purchases that are used for business purposes.
Jewellers can claim input tax credit for the GST paid on raw materials, such as
gold, silver, and diamonds, as well as other expenses, such as rent,
electricity, and labour.
However, ITC cannot be claimed on making charges.
e-Way bill rules for gold and its forms
From 13th September 2022, as per
respective state notifications, the NIC has enabled a separate window for
generating e-way bills for transporting gold, gold jewellery or precious
stones.
GST Reports to be submitted
Auto Generated Reports in GST Portal
Customers walks into a Jeweller showroom and buys a Gold ornament
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.
Customers walks into a Jeweller showroom and buys a Gold ornament 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%.
Customer gives old jewellery and in return buys a Gold ornament
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.
Sale of old jewellery by individual to jeweller not liable to reverse charge mechanism.
There is confusion regarding purchase of old gold jewellery by a jeweller from an Individual will be subject to GST @ 3% under reverse charge mechanism (RCM) in terms of the provisions contained in Section 9(4) of the CGST Act, 2017.
Clarification
by Ministry of Finance on 13-07-2017. It
is therefore clarified by Government that Sale of old jewellery by an
individual to a jeweller will not make the jeweller liable to pay tax under RCM
on such purchases.
Section
9(4) of the CGST Act mandates that tax on supply of taxable goods by an
unregistered supplier to a registered person will be paid by the registered
under reverse charge mechanism.
This
provision, however, must be read in combination with section 2(105) read with
section 7 of the CGST Act. Section 2
(105) defines supplier – “as a person supplying the goods or services”. Section 7 provides that “a supply is a
transaction for a consideration by a person in the course
or furtherance of business”.
In
simple words, to pay RCM on sale or supply of
goods and services by unregistered dealer to registered dealer following two
conditions are required to be fulfilled.
Transaction should be for consideration; Transaction should
be in the course or furtherance of his business. If both conditions are met,
then RCM is to be paid by the registered supplier.
Here in
this case even though the sale of old jewellery by an individual is for a
consideration, it cannot be said to be in the course or furtherance of his
business (as selling old gold jewellery is not the business of the said
individual), and hence does not cover under the definition of supply. If supply
has not been done, Taxable event will not arise.
Conclusion
Therefore, the sale of old jewellery by an
individual to a jeweller will not attract GST under RCM and jeweller will
not be liable to pay tax under RCM on such purchases. Therefore, jeweller is not required to
maintain any specific record for such purchase. It is advised to record as a
general cash purchase without GST.
Exception:
However,
if an unregistered supplier of gold ornaments sells it to registered supplier,
the tax under Reverse Charge Mechanism (RCM) will apply. The reason for the exception is the
unregistered supplier is selling goods in the course or furtherance of
his business and sale is for consideration i.e. fulfilling both the
conditions as mentioned above
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.
Customer owns gold and gets a gold bangle made from the Jeweller. The
Jeweller charges making charges from the customer and pays 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.
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).
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.
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.
Casual Registration under GST
"Casual taxable person''
means a person who occasionally undertakes transactions involving supply of
goods or services or both in the course or furtherance of business, whether as
principal, agent or in any other capacity, in a State or a Union territory
where he has no fixed place of business.
A casual taxable person (other
than those making supply of specified handicraft goods) making taxable supply
in India must compulsorily take registration.
There is no threshold limit for
registration.
Casual Taxable persons making
supply of specified handicraft goods need to register only if their aggregate
turnover crosses the threshold limit.
A casual taxable person cannot
exercise the option to pay tax under composition levy.
He must apply for registration
at least five days prior to commencing his business in India.
A casual taxable person must
make an advance deposit of tax in an amount equivalent to his estimated tax
liability for the period for which the registration is sought.
The registration certificate
shall be issued electronically only after the said deposit appears in his
electronic cash ledger. The amount deposited shall be credited to the
electronic cash ledger of casual taxable person. On depositing the amount, an
acknowledgement shall be issued electronically to the applicant in FORM
GSTREG-02.
The casual taxable person can
make taxable supplies only after the issuance of the certificate of
registration. The certificate of registration shall be valid for the period
specified in the application for registration or ninety days from the effective
date of registration, whichever is earlier.
In case the casual taxable
person intends to extend the period of registration indicated in his
application of registration, an application in FORM GST REG-llshall be
submitted electronically through the Common Portal, either directly or through
a Facilitation Centre notified by the Commissioner before the end of the
validity of registration granted to him.
The validity period of ninety
days can be extended by a further period not exceeding ninety days. The
extension will be allowed only on payment of the amount of an additional amount
of tax equivalent to the estimated tax liability for the period for which the
extension is sought.
RReturns to be submitted by Casual Person under GST
FORM GSTR-1 Giving the details of outward
supplies of goods or services to
be filed on or before the tenth day of the following month.
FORM GSTR-2 Giving the details of inward
supplies to be filed after tenth but
before the fifteenth day of the following month.
FORM GSTR-3 To be filed after fifteenth day but
before the twentieth day of
the following month.
FORM GSTR-3B To be filed but before the twentieth
day of the following month.
However, a casual tax person
shall not be required to file any annual return as required by a normal
registered taxpayer.
Refund by Casual taxable person:
The casual taxable person is
eligible for the refund of any balance of the advance tax deposited by him
after adjusting his tax liability. The balance advance tax deposit can be efunded
only after all the returns have been furnished, in respect of the entire period
for which the certificate of registration was granted to him had remained in
force. The refund relating to balance in the electronic cash ledger has to be
made in serial no. 14 of the last FORM GSTR-3 return required to be furnished
by him (instead of FORM GST RFD0l).
Tax Rates on Jewellery
GST is levied on jewellery at
different rates, depending on the type of jewellery and its value. The tax
rates on jewellery are as follows:
|
Particulars |
HSN Code |
GST Rate |
|
Gold Bars, Diamond, pearls, Jewellery, and diamond jewellery -
Irrespective of the carat of gold - value of the jewellery, including
synthetic or reconstructed stones, unworked or simply sawn or roughly shaped |
7101, 7102 |
3.00% |
|
Precious stones (other than diamonds) and semi-precious stones, whether
worked or graded but not strung, mounted, or set |
7103 |
2.50% |
|
Ungraded precious stones (other than diamonds) and semi-precious
stones, temporarily strung for convenience of transport (includes synthetic
or reconstructed stones, apart from unworked or simply sawn or roughly
shaped) |
7104 |
2.50% |
|
Silver (including silver plated with gold or platinum), |
7106 |
3.00% |
|
Gold (including gold plated with platinum) unwrought or in
semi-manufactured forms, or in powder form |
7108 |
3.00% |
|
Base metals or silver, clad with gold, not further worked |
7109 |
3.00% |
|
Platinum, unwrought or in semi-manufactured forms, or in powder form |
7110 |
3.00% |
|
Base metals, silver or gold, clad with platinum, not further |
7111 |
3.00% |
|
Articles of jewellery and parts thereof, of precious metal |
7113 |
3.00% |
|
Articles of goldsmiths' or silversmiths' wares and parts |
7114 |
3.00% |
|
Other articles of precious metal or of metal clad with |
7115 |
3.00% |
|
Articles of natural or cultured pearls, precious or semiprecious
stones (natural, synthetic, or reconstructed) |
7116 |
3.00% |
|
Imitation jewellery [other than bangles of lac/shellac] |
7117 |
3.00% |
|
Coin |
7118 |
3.00% |
|
Sale of old gold |
|
NIL |
|
|
|
|
|
Making charges of gold and diamond jewellery |
|
5.00% |
|
Goldsmith or Silversmith services |
|
5.00% |
|
Consumers who approach the goldsmiths by themselves |
|
5.00% |
|
Repair works on jewellery will be considered as making charges |
|
5.00% |
|
|
|
|
|
Gold Import - (including customs duty of 7.5% and 3% GST) |
|
10.75% |
|
|
|
|
|
Services by way of job work in relation to cut and polished diamonds,
plain or studded jewellery of gold, silver and so on |
9988 |
3.00% |
|
Services by way of job work in relation to diamonds |
9988 |
1.50% |
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