Gold jewellery purchases often leave customers confused about the applicable GST, particularly when it comes to making charges. Many buyers believe that 3% GST is levied on the gold value and an additional 5% on making charges. However, the GST rules provide for a single tax rate of 3% on the total transaction value of finished gold, silver or diamond jewellery purchased from a retailer. Even if the making charges are mentioned separately on the invoice, the applicable GST rate remains unchanged. Understanding this distinction can help buyers avoid paying excess tax.
How much GST applies to jewellery worth Rs 1.40 lakh?
Consider the purchase of a 10-gram gold chain priced at Rs 1,28,000, with an additional making charge of Rs 12,000. The total value of the jewellery comes to Rs 1,40,000. Under the applicable GST rules, 3% tax is calculated on the entire amount, which means the customer has to pay Rs 4,200 as GST. The gold value and making charges are not taxed separately at different rates in this retail transaction.
Why are gold and making charges not taxed separately?
A common misconception among jewellery buyers is that the gold component attracts 3% GST while the making charges attract 5%. However, the applicable rate for the supply of finished jewellery is 3% on its total transaction value. This remains the case even when the jeweller lists the making charges as a separate item on the bill. The breakup of the price does not change the GST rate applicable to the finished product.
How much extra could customers pay if GST is calculated separately?
Taking the example of the Rs 1,40,000 gold chain, a calculation involving different GST rates would look like this:
- Gold value: Rs 1,28,000 × 3% = Rs 3,840
- Making charges: Rs 12,000 × 5% = Rs 600
- Total GST charged: Rs 4,440
However, applying 3% GST to the entire jewellery value of Rs 1,40,000 results in a tax amount of Rs 4,200. The difference is Rs 240. Therefore, customers should carefully examine the tax calculation on their jewellery invoices, particularly when different components are listed separately.
When does the 5% GST rate on making charges apply?
The 5% GST provision on making charges relates to job work rather than the retail sale of finished jewellery. For instance, when a jewellery manufacturer or retailer sends gold to an artisan for making ornaments and receives the finished pieces in return, the artisan’s labour charges may attract 5% GST.
This is a transaction between the jeweller and the artisan. It is separate from the sale of finished jewellery to a customer. Therefore, the 5% job-work GST provision should not be used as a basis for charging customers an additional 5% tax on making charges when they purchase ready-made jewellery from a retailer.
What if the artisan is not registered under GST?
If the artisan undertaking the jewellery-making work is registered under GST, the applicable 5% tax can be charged on the job-work services. The jewellery dealer may also be eligible to claim Input Tax Credit (ITC), subject to the applicable conditions.
In cases where the artisan is not required to register under GST, the jewellery dealer may have to discharge the tax liability under the Reverse Charge Mechanism (RCM), depending on the applicable provisions. These rules govern the transaction between the artisan and the jewellery dealer and do not automatically permit a separate 5% GST charge on the retail bill of a customer purchasing finished jewellery.
GST 2.0: Why the 3% rate on jewellery remains unchanged
The GST rate structure underwent changes in September 2025 under GST 2.0. However, the tax rate applicable to the gems and jewellery sector remained at 3%. The 56th meeting of the GST Council was held on September 3, 2025, and the existing provision of levying 3% GST on the total value of finished jewellery continued. Invest India’s Gems and Jewellery FAQ also provides information on the applicable tax treatment.
Since when has 3% GST been applicable to gold and silver?
According to the government’s FAQ, the 3% GST rate on gold and silver came into effect on July 1, 2017, when the Goods and Services Tax replaced the earlier indirect tax system. The same rate was also applied to stocks of gold and silver held by banks and designated agencies during the transition to GST. In addition to basic customs duty, imports of precious metals also attract 3% Integrated GST (IGST). Banks can claim input tax credit on this tax, subject to applicable provisions.
What should customers check on their jewellery bills?
Customers purchasing ready-made gold, silver or diamond jewellery should check whether 3% GST has been applied to the entire transaction value. For instance, a jewellery purchase worth Rs 2 lakh would attract GST of Rs 6,000 at the applicable rate. The tax calculation remains the same even if the making charges are separately mentioned on the invoice.
However, the tax treatment may differ when customers provide their own gold to have jewellery made or seek repair services for existing ornaments. In such cases, GST may apply differently depending on the nature of the transaction. Buyers should ask jewellers to clearly explain the applicable tax rate and its calculation before making the payment.