GST on Gold & Jewellery Explained: Rates, Making Charges & ITC Rules 2026

For the Indian consumer, buying gold is an emotional and financial milestone. Under the GST regime in 2026, the tax structure is designed to bring transparency and prevent the "Black Money" issues that plagued the old VAT system. However, for both buyers and jewelers, the multi-layered tax rates on Gold vs. Making Charges can be confusing.

Whether you are a customer looking to minimize your purchase cost or a jeweler managing your Input Tax Credit (ITC), here is the essential guide to GST compliance in the jewelry sector for the current financial year.

1. The Dual Tax Structure: 3% and 5%

When you receive a bill from a reputed jeweler, you will notice that the tax isn't just a single flat rate. It is split based on the nature of the transaction:

• Gold Value (3% GST): Every gram of 22k or 24k gold is taxed at a flat rate of 3%. This is for the "Supply of Goods."
• Making Charges (5% GST): The service of turning raw gold into a beautiful ornament is treated as "Job Work" or "Supply of Services." This attracts a 5% GST.

The Consolidated Bill Rule: Most jewelers provide a "composite supply" bill where the GST is averaged or shown separately for the gold component and the designing component. As a buyer, always ensure the bill explicitly mentions the Weight, Purity, and HSN Code (7113) for your legal protection.

2. Selling or Exchanging Old Gold: The GST Twist

A common question during wedding seasons is: "Do I pay GST if I give old gold to the shop?"

1. Consumer Selling Gold: When you sell your old jewelry to a jeweler, you are not "in business." Therefore, No GST is applicable on this transaction.
2. Purchase Against Exchange: If you exchange 100g of old gold for a 120g new necklace:
   • No GST on the 100g you sold.
   • 3% GST on the value of the Total 120g of the new necklace.
   • 5% GST on the Making Charges of the new necklace.

The jeweler cannot "offset" the GST of the old gold because you (the consumer) didn't charge GST to them.

3. Input Tax Credit (ITC) for Jewelers

For business owners, GST is a "Value Added Tax." The tax paid on purchases can be subtracted from the tax collected from customers.

• Bullion Purchase: If a jeweler buys gold bars from a bank (paying 3% GST), they can claim full ITC.
• Job Work: If you send gold to an artisan to make jewelry and pay them 5% GST, that is also claimable as ITC.
• Overhead Expenses: GST paid on shop rent, security services, professional fees (CAs), and display furniture can all be used to lower your final GST payable.

4. E-Way Bill and PMLA Scrutiny

Gold is high-value and low-volume, making it a target for the department's surveillance.

• E-Way Bill: Moving gold worth more than the threshold (usually ₹50,000 or a higher state-specific limit) requires a valid GST E-way bill.
• PMLA (Anti-Money Laundering): Jewelers are now "reporting entities." If you make a purchase above ₹2 Lakh in cash, the jeweler is legally bound to report you under SFT/PMLA rules.

Legal Reference: Composite Supply

The GST on making charges is often a point of dispute. The law clarifies this through the concept of "Composite Supply."

Section 2(30) of the CGST Act— "Composite Supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services... which are naturally bundled...

In jewelry, the gold and the making are "naturally bundled." The department usually accepts the 3% rate for the whole piece if it's sold as a finished product, but most jewelers prefer the safer split-rate billing to avoid GST ADT-01 Audits.

Common Mistakes with Gold GST

1. Buying Without a Bill: To save 3%, customers often buy without a bill. This is a massive legal risk. If the gold is seized during a Search/Scrutiny, you have zero proof of ownership or Purity (Hallmarking).
2. Mismatched Weight in HSN: Jewelers must report the weight in grams accurately in GSTR-1. If there is a mismatch between the weight of gold purchased (ITC) and the weight sold (Output), it triggers an automated GST Demand Notice.
3. Forgetting RCM (Reverse Charge): If a jeweler buys from an unregistered person (like a casual consumer) and that consumes a high percentage of their stock, it might trigger secondary scrutiny on "Unexplained Business Incomes" in Income Tax.

Conclusion

To simplify your compliance, always insist on a computerized HSN-coded invoice. For jewelers, ensuring that your GSTR-2B matches your input purchases is the only way to safeguard your ITC.

If you are selling high-value jewelry, remember that while GST doesn't apply to the sale, Capital Gains Tax definitely does. For more, see our guide on The 24-Month Rule for Gold. For details on the department's surveillance on cash deposits from such sales, read Bank Deposits & SFT Notices.