If you love jewellery or are in the diamond jewellery business, it’s important to understand the taxes involved. The Goods and Services Tax (GST) in India applies to almost everything we buy, including diamonds and diamond jewellery. In this blog, we’ll dive into how GST impacts the diamond jewellery sector in 2024, look at tax rates, HSN codes, and explain everything in simple, easy-to-understand language.
Whether you’re a diamond jeweller, a buyer, or just curious about the tax system, this guide will clear up your questions. Let’s break it down!
What is GST?
Before we jump into the details about diamonds and jewellery, let’s talk about GST for a minute. The Goods and Services Tax (GST) is a tax that applies to almost every good and service sold in India. It was introduced in 2017 to make the tax system simpler. Instead of multiple taxes like VAT, excise, and service tax, now we only have to deal with GST. It is collected at different stages of production, but consumers pay it when they make a purchase.
GST on Diamond Jewellery: What’s the Rate in 2024?
The GST rate on diamond jewellery has stayed relatively consistent since its introduction. As of 2024, the GST rate on diamond jewellery remains 3%. This means that when you buy diamond jewellery, you’ll have to pay an additional 3% of its price as tax.
Here’s a quick breakdown of how it works:
- For buyers: If you’re purchasing diamond jewellery, you will pay a 3% GST on the final price. For example, if the jewellery costs ₹1,00,000, you will pay an additional ₹3,000 as GST.
- For sellers: If you’re selling diamond jewellery, you must collect 3% GST from your customers and pay it to the government.
This GST applies only to the final jewellery product. So, if you’re buying loose diamonds or uncut diamonds, the GST rate may be different. We’ll get to that shortly.
What Are HSN Codes, and Why Do They Matter?
HSN stands for “Harmonized System of Nomenclature.” These are codes used internationally to classify products for taxation purposes. Every product category has its own HSN code, which helps in identifying what kind of tax applies to it. In India, HSN codes are used to apply the right GST rate to different items.
If you’re in the diamond jewellery business or even a buyer interested in knowing how taxes are applied, you’ll want to understand the HSN codes for diamonds and diamond jewellery.
HSN Codes for Diamond and Jewellery
Here are the key HSN codes for the diamond jewellery industry in 2024:
- HSN Code 7113 – This is the main code for jewellery, including gold, silver, and diamond jewellery. Any jewellery made from precious metals or diamonds will fall under this category. The GST rate applied to products under this HSN code is 3%.
- HSN Code 7102 – This code is for diamonds, whether rough or polished. The GST rate for polished diamonds under this code is 0.25%, making it very low.
- HSN Code 7101 – For unworked or uncut diamonds, this HSN code applies. The GST rate for rough diamonds is 0.25%, so buying loose diamonds to set into jewellery is taxed at a much lower rate than fully crafted jewellery.
If you’re a seller, you need to mention these HSN codes on your invoices to ensure you’re charging the correct GST.
Why Does GST Differ for Loose Diamonds and Finished Jewellery?
You might be wondering why there is such a huge difference between the GST rate for polished/rough diamonds (0.25%) and diamond jewellery (3%). Well, the logic is pretty simple. When diamonds are turned into jewellery, there’s a lot of craftsmanship involved. This includes setting the diamonds in metal, designing the jewellery, and polishing it for a final product. The 3% GST is applied to the final value-added product — the jewellery.
On the other hand, when you’re buying loose diamonds, whether rough or polished, they haven’t been crafted into anything yet. Hence, the tax rate is much lower.
Here’s a quick comparison:
| Item | HSN Code | GST Rate |
|---|---|---|
| Rough Diamonds (Uncut) | 7101 | 0.25% |
| Polished Diamonds | 7102 | 0.25% |
| Diamond Jewellery | 7113 | 3% |
Importing and Exporting Diamonds: How Does GST Work?
India is one of the largest hubs for diamond processing and jewellery manufacturing. A lot of diamonds are imported into India, and a significant portion of diamond jewellery is also exported.
- Importing diamonds: When diamonds are imported into India, GST is applied based on the type of diamond (rough or polished). For rough diamonds, the GST rate remains at 0.25%. If polished diamonds are imported, the same 0.25% GST applies. However, diamond jewellery imported from other countries will attract a 3% GST.
- Exporting diamonds: When it comes to exporting, diamond jewellery is considered a zero-rated supply. This means that exporters can claim refunds on the GST they paid during the production process, making exports tax-free from the seller’s perspective.
Understanding the Input Tax Credit (ITC) in Diamond Jewellery
If you’re in the business of making or selling diamond jewellery, you can benefit from Input Tax Credit (ITC). ITC allows businesses to reduce the amount of GST they owe by claiming credit for the GST they’ve already paid on purchases for their business.
For example, if a jeweller buys rough diamonds and then turns them into jewellery, the jeweller can claim ITC on the 0.25% GST paid on the rough diamonds. This helps reduce the overall tax burden, making it easier to do business.
However, there are specific conditions and rules to claiming ITC, so it’s always a good idea to consult with a tax professional or accountant to make sure you’re doing it correctly.
Special GST Rates on Gold and Silver Jewellery
While this blog focuses on diamond jewellery, it’s worth noting that gold and silver jewellery have different GST rates.
- Gold jewellery: 3% GST
- Silver jewellery: 3% GST
These rates are the same as for diamond jewellery, making it easier for jewellers who sell multiple types of precious jewellery.
Exemptions and Special Cases in GST for Jewellery
There are a few special cases and exemptions to be aware of when it comes to GST and jewellery:
- Old jewellery: If you’re selling old or used jewellery, GST might not apply in the same way. For instance, if you trade in your old diamond jewellery for a new piece, GST will only be charged on the difference in value.
- Job work: Sometimes, jewellers might send out loose diamonds or jewellery for “job work,” which includes services like polishing, setting stones, or other labour. GST is charged at 5% on job work for precious and semi-precious stones, including diamonds.
How GST Affects Jewellery Buyers
If you’re a buyer, GST adds an extra cost to your jewellery purchase. You pay GST on the total price, which can make expensive diamond jewellery even pricier. But it’s essential to remember that GST is a part of the price tag now, and it applies to all diamond jewellery sold in India.
Pro Tip for Buyers: Always ask for a proper GST invoice when you buy diamond jewellery. This ensures you’re paying the correct tax amount and can even help if you need to return or exchange the item.
How GST Affects Jewellery Sellers
For jewellers and sellers, GST compliance is critical. Not charging the correct GST rate or failing to pay GST to the government can result in penalties. Plus, with different GST rates for loose diamonds and finished jewellery, it’s crucial to get your billing right.
Here are a few things sellers should always keep in mind:
- Use the correct HSN code for the product you’re selling.
- Keep track of the different GST rates for loose diamonds and finished jewellery.
- Make sure you’re filing your GST returns on time.
- Don’t forget to claim ITC on your purchases.
Final Thoughts on GST and Diamond Jewellery in 2024
The GST on diamond jewellery in 2024 remains at 3%, with lower rates for loose and uncut diamonds. While this tax does add to the cost for buyers, it also helps bring transparency and structure to the jewellery industry. For businesses, understanding HSN codes and claiming Input Tax Credit can make a big difference in managing costs.
Whether you’re buying or selling, staying informed about GST is essential. The diamond jewellery industry continues to thrive in India, and with the right knowledge, navigating GST can be a lot smoother!