GST on Diamond Jewellery

The Goods and Services Tax (GST) is a comprehensive taxation system applicable to the supply of various goods and services, including diamond jewellery. The GST rate on diamond jewellery is decided by the GST Council of India. The council revised the GST on cut and polished diamonds as recently as June, 2022.

 

Read on to find out the GST rate on diamond jewellery and all you need to know about the applicable GST rules on this gem.  

A complex set of rules governs the GST on diamond and diamond jewellery. Moreover, the diamond industry falls under several tax slabs. So, it is necessary to understand the applicability of GST on diamond jewellery and diamond jewellery before you decide to purchase. 

 

Check the following table to get an idea about the applicable GST rate for diamond jewellery:

Note: The GST rate on cut and polished diamonds has been raised from 0.25% to 1.5% following the GST order released in June 2022. 

Before the introduction of a unified Goods and Services Tax (GST), several central and state government taxes were levied when you purchased diamond jewellery.  

 

For instance, state governments charged a Value Added Tax (VAT) ranging between 1-1.2%. However, some states, like Kerala, levied a VAT of as high as 5%. In addition, a 10% customs duty was also levied on diamond jewellery. 

 

Since the introduction of GST in 2017, a 3% charge has been levied on diamond jewellery. The GST rate for rough, unworked or sawn diamonds is 0.25%. However, diamond jewellery continues to attract an import duty of 10% even under this new tax regime.

 

Here is a table to give you a clear idea about the difference in the cost of diamond jewellery pre- and post-GST regime.

So, the biggest impact of GST on diamond and diamond jewellery is that it has helped streamline taxation. Moreover, it has promoted transparency and reduced the cost of diamond jewellery in the county as the government has done away with a host of taxes. 

HSN, or Harmonised System of Nomenclature, is a 2 to 8-digit code meant for classifying different products under the GST regime. Chapter 71 of the HSN code contains the code for all types of precious metals and stones, including diamonds. 

 

On the other hand, the government also uses a Service Accounting Code or SAC to compute taxation on different services. This system has been introduced by the Central Board of Indirect Taxes and Customs (CBIC). 

 

The following table contains the HSN and SAC code and applicable GST rates on different diamond jewellery and job work for diamond products:  

Section 10 of the IGST Act, 2017 states it as the location where the movement of a particular good terminates for its final delivery. According to the act, the final recipient renders the tax on the product.

 

So, a place of supply in the case of diamond jewellery would be a jewellery showroom selling diamonds. So, the showroom will charge GST on diamonds from the final recipients. Note the inter-state movement of diamonds attracts Integrated GST (IGST).

In the context of diamond jewellery, the GST is payable either when the jeweller receives the payment or supplies the jewellery, whichever is earlier.

As per the annexure to Rule 138(14) of the CGST Rules, 2017, there is no need to generate e-way bills for the movement of: 

• Jewellery

• Gems, precious metals and stones

• Certain other articles  

Under the Goods and Services Tax, jewellers and diamond merchants can claim an input tax credit (ITC). They can claim ITC of all inputs, including:

• Capital goods

• Packing materials

 

However, inputs provided under Section 17(5) of the CGST Act, 2017 are not liable for the tax credit. You must also be aware that there is no refund on an accumulation of Input Tax Credit (ITC) under Section 54(3) of the Act. 

 

The Government of India has declared the export of precious stones, gems and jewellery as a focused area. This decision comes against the backdrop of cut and polished diamonds accounting for 66% of the total gems and jewellery exports in FY 21-22. 

 

So, it is expected that the government will streamline and rationalise GST rates on diamonds in the coming months. The hike in GST on loose diamonds that are cut and polished from 0.25% to 1.5% is a step in that direction.