How to Calculate GST on Gold Jewellery: A Step-by-Step Guide for Businesses
To calculate GST on gold jewellery, you must apply a 3% GST rate on the value of the gold and the making charges, as it is classified as a composite supply under Section 8 of the CGST Act. Alternatively, if you outsource the manufacturing, the job worker charges 5% GST on the making charges under HSN 9988. Understanding how to calculate GST on gold jewellery is essential for jewellers, accountants, and tax practitioners to avoid compliance errors and optimize Input Tax Credit (ITC).
Understanding the GST Rates on Gold and Making Charges
Under the Indian GST regime, gold transactions are subject to different tax rates depending on the stage of the transaction and the nature of the service. To understand how to calculate GST on gold jewellery, we must first break down these rates:
- Gold Bullion / Raw Gold (HSN 7108): Taxed at 3% GST.
- Gold Jewellery (HSN 7113): Taxed at 3% GST.
- Making Charges / Job Work (HSN 9988): Taxed at 5% GST if outsourced to an independent artisan (job worker).
The Composite Supply Rule (Section 8 of the CGST Act)
One of the most common points of confusion for jewellers is how to tax making charges when selling directly to a retail customer. Under Section 8 of the CGST Act, 2017, when two or more supplies are naturally bundled and supplied together, it is treated as a "composite supply."
In the case of gold jewellery, the gold itself and the making charges are bundled. The principal supply is the gold jewellery (taxed at 3%). Therefore, even if you list the making charges as a separate line item on your retail invoice, the entire transaction value (Gold Value + Making Charges) must be taxed at the principal rate of 3%. You do not charge 5% on making charges to the end consumer; the 5% rate is strictly for B2B job work services.
Key GST Rates at a Glance
- Retail Sale of Jewellery: 3% on the entire invoice value (including making charges).
- Outsourced Job Work: 5% on the job work invoice issued by the artisan to the jeweller.
- Old Gold Purchase from Customer: Exempt from GST (no RCM applicable).
How to Calculate GST on Gold Jewellery: A Step-by-Step Example
Let us look at a real-world scenario to see exactly how these numbers play out on a tax invoice. Suppose a customer purchases a gold necklace from your showroom with the following details:
- Gold Weight: 30 grams
- Gold Rate (per gram): ₹7,500
- Making Charges: ₹250 per gram
- Transaction Type: Intra-state (within the same state)
Step 1: Calculate the Value of the Gold
First, multiply the weight of the gold by the daily gold rate:
30 grams × ₹7,500 = ₹2,25,000
Step 2: Calculate the Making Charges
Next, calculate the total making charges based on the weight:
30 grams × ₹250 = ₹7,500
Step 3: Determine the Taxable Value
Add the gold value and the making charges to find the total taxable value under Section 15 of the CGST Act:
₹2,25,000 + ₹7,500 = ₹2,32,500
Step 4: Apply the GST Rate
Since this is an intra-state transaction, the 3% GST is split equally into CGST (1.5%) and SGST (1.5%):
- CGST (1.5% of ₹2,32,500): ₹3,487.50
- SGST (1.5% of ₹2,32,500): ₹3,487.50
- Total GST (3%): ₹6,975.00
Step 5: Calculate the Final Invoice Value
Add the GST to the taxable value to get the final amount payable by the customer:
₹2,32,500 + ₹6,975 = ₹2,39,475
How to Calculate GST on Gold Jewellery in Job Work (Outsourced Manufacturing)
In many cases, jewellers do not manufacture the jewellery themselves. Instead, they send raw gold to an independent artisan (job worker). The tax treatment here is different because it is a pure service transaction under HSN 9988.
According to CBIC Circular No. 27/01/2018-GST, job work services in relation to diamonds and precious metals are taxed at 5% GST. Let us look at how this is calculated:
- Raw Gold Sent: 50 grams (No GST is charged when sending raw materials for job work under Section 143 of the CGST Act).
- Artisan's Making Charges: ₹15,000
- GST on Job Work (5%): ₹750 (split as 2.5% CGST and 2.5% SGST for intra-state)
- Total Invoice by Artisan: ₹15,750
The jeweller pays this ₹15,750 to the artisan and can claim the ₹750 as Input Tax Credit (ITC) to offset their liability when they eventually sell the finished jewellery.
Handling Old Gold Exchanges and GST Implications
A significant portion of retail jewellery sales involves customers exchanging old gold jewellery for new pieces. This raises two critical questions: Is GST applicable on the value of the old gold? And is Reverse Charge Mechanism (RCM) applicable under Section 9(4)?
The Central Board of Indirect Taxes and Customs (CBIC) clarified this in a press release dated 13th July 2017. Since an individual customer selling their personal old gold is not doing so "in the course or furtherance of business," the transaction is not considered a supply under GST. Therefore, no GST is applicable on the purchase of old gold from an unregistered retail customer, and the jeweller is not liable to pay RCM.
Example of an Exchange Calculation
Suppose a customer buys a new gold ring worth ₹1,00,000 (including making charges) and exchanges an old gold ring valued at ₹40,000. How do you calculate the tax?
GST must always be calculated on the gross value of the new jewellery, not the net cash difference. Here is the correct calculation:
- Gross Value of New Jewellery: ₹1,00,000
- GST (3% on ₹1,00,000): ₹3,000
- Total Value of New Purchase: ₹1,03,000
- Less: Value of Old Gold Received: ₹40,000
- Net Cash Payable by Customer: ₹63,000
If you mistakenly calculate GST only on the net amount of ₹60,000 (₹1,00,000 - ₹40,000), you will underpay your tax by ₹1,200, leading to penalties and interest under Section 50 of the CGST Act.
Keep Your Jewellery Purchase Books & ITC Flawless with GstTracker
While GstTracker does not generate retail invoices or calculate daily gold rates, it is the ultimate tool for managing your jewellery business's backend accounting and Input Tax Credit (ITC). Built entirely inside WhatsApp, GstTracker lets you snap a photo of your purchase invoices (from bullion dealers or job workers) and automatically extracts the vendor, invoice number, date, amounts, and line items. It validates the GST math on each invoice (including the 3% gold slab and 5% job work slab) and flags errors. Best of all, you can upload your downloaded GSTR-2B Excel to instantly reconcile your purchases and ensure you never lose a single rupee of eligible ITC on high-value gold transactions.
Try it free on WhatsApp →Why Knowing How to Calculate GST on Gold Jewellery Protects Your Margins
Because gold is an incredibly high-value commodity, even a minor error in tax calculation or ITC reconciliation can severely impact your business's profitability. Under Section 16(4) of the CGST Act, you can only claim Input Tax Credit if your suppliers have filed their returns and the invoices are correctly reflected in your GSTR-2B.
If a bullion supplier or a job worker fails to file their GSTR-1, the tax you paid to them will not appear in your GSTR-2B. Without a robust reconciliation process, you might claim ineligible ITC, leading to tax demands, interest at 18% per annum, and potential penalties from the GST department. Regularly reconciling your purchase registers against your GSTR-2B is the only way to safeguard your business from these risks.
Frequently Asked Questions
What is the GST rate on gold jewellery?
The GST rate on gold jewellery is 3% on the total value, which includes both the gold value and making charges when sold as a composite supply. This rate applies to both readymade jewellery and customized pieces sold directly to retail consumers.
Is GST applicable on making charges of gold jewellery?
Yes, GST is applicable on making charges, but the rate depends on whether it is a direct sale of jewellery (3% as a composite supply) or outsourced job work (5% under HSN 9988). When a jeweller sells jewellery to a customer, the making charges are bundled into the principal supply of gold, making the entire invoice taxable at 3%.
Do we have to pay GST when selling old gold?
No, a retail customer selling old gold to a registered jeweller does not have to pay GST, and the jeweller is not liable to pay RCM on such purchases. The CBIC clarified that personal gold sales by individuals are not considered "in the course or furtherance of business."
Can a jeweller claim Input Tax Credit (ITC) on gold purchases?
Yes, a registered jeweller can claim Input Tax Credit (ITC) on gold purchases and job work charges, provided the purchases are used for business purposes and the invoices are correctly reflected in their GSTR-2B. This ITC can be used to offset the GST liability on their sales.
Sources & further reading
- Official GST Portal (GSTN)
- Central Board of Indirect Taxes and Customs (CBIC)
- CBIC Press Release on Old Gold Purchases (13th July 2017)
- CBIC Circular No. 27/01/2018-GST on Job Work Sector
Conclusion
Mastering how to calculate GST on gold jewellery is a non-negotiable skill for modern Indian jewellers. By correctly applying the 3% composite supply rate on retail sales, charging 5% on outsourced job work, and accurately accounting for gross values during old gold exchanges, you protect your business from compliance audits and penalties. Always ensure your purchase invoices are meticulously recorded and reconciled against your GSTR-2B to keep your business running smoothly and profitably.
Reviewed 22 August 2026 This article is general information, not tax or legal advice. GST law changes frequently — confirm the current position on the official GST portal and with your Chartered Accountant before acting.