GST on gold in India, with a worked example

GST on gold jewellery is 3%. Not 3% on the metal and 5% on the making charges, but 3% on the whole bill. That surprises people who have read that making charges are taxed at 5%, and both statements are true; they just describe different transactions.

Why a retail bill is 3% on everything

When a jeweller sells you a finished ornament, the metal and the labour are not two purchases. They are one supply, of a chain or a bangle, and gold is the principal part of it. GST calls this a composite supply and taxes the whole thing at the rate of the principal supply, which is 3%.

So on a normal purchase from a shop, the making charges are inside the 3%. There is no separate 5% line.

When 5% does apply

The 5% rate is for making supplied as a service rather than bundled into a finished product. The clearest case is custom work: you bring the gold, a craftsman turns it into something, and you pay for labour. Then there is no composite supply to fold the labour into, and the making is taxed in its own right.

A jeweller who itemises making charges on the invoice is not automatically billing this way. Itemising is a courtesy; what matters is whether the supply is a finished piece or a service.

The difference, in rupees

A 10 gram 22K chain at today’s benchmark of ₹14,059.30 a gram, with making charges at 12%:

The gap is ₹337, the extra two percentage points falling on the making charges alone. Worth understanding, but small next to the difference between two shops’ making charges, which on the same chain can run to ten times that. If you are trying to save money, the making charges are where it is.

Old gold: selling and exchanging

This is the part that generates the most confusion, and the answer is more favourable than most people expect.

Selling your own jewellery. An individual selling personal gold does not bear GST on that sale. You are not a registered dealer making a taxable supply; the obligation sits with the registered buyer. A dealer who then resells that second-hand gold charges 3% on their sale.

Exchanging old for new. The gold you hand over is not a taxable sale by you. GST applies to the new piece you are buying. Where making is billed as a separate service on that new piece, it carries its own rate.

What to insist on: an invoice that shows the exchange value of your old gold and the taxable value of the new piece as separate lines. If the shop nets them into a single figure you cannot check what you were taxed on.

How a jeweller arrives at that exchange value, and the capital gains position on a sale, are covered in selling or exchanging old gold.

Where import duty fits

Import duty and GST are often described as stacking. They do not stack the way people picture. Duty, currently 6%, being 5% basic customs duty and 1% cess, is paid when metal enters the country, so it is already inside the rate quoted to you. GST is then charged on the bill at the counter. You are not paying 6% and 3% as two visible lines; one is buried in the rate and the other is printed on the invoice.

How the rate itself gets to that point is covered in how gold prices are set in India.

Checking your own bill

Three things make a jewellery invoice checkable: the billed weight, the making charge basis, and the value GST was applied to. If all three are printed, you can reproduce the total yourself in a minute. The jewellery price calculator has both GST treatments built in, so you can check a quotation against either.

This is information, not tax advice. For a transaction that matters, or anything involving a business rather than a personal purchase, talk to a qualified professional.