#GST on Gems & Jewelry : A Detailed Analysis# By SN Panigrahi

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SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler & Public Speaker.
He is an International-Corporate Trainer, Mentor & Author
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic
Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes –
GST etc.
He had done more than 150 Workshops on above
Published more than 500 Articles
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India
Champion
Also a Certified Lean Six Sigma Green Belt from Exemplar Global
Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India)
ZED Consultant – Certified by QCI – MSME (Govt of India)
Member Board of Studies, IIMM
Co-Chairman, Indirect Tax Committee, FTAPCCI
Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution to business thoughts.
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
Hyderabad

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 The gems and jewellery market in India is home to more than 300,000 players, with the majority being small players.
 Its market size is about US$ 75 billion as of 2017 and is expected to reach US$ 100 billion by 2025.
 India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the
Indian economy as it contributes a major chunk to the total foreign reserves of the country.
 The Gems and Jewellery sector, contributing around 7 per cent of the country’s GDP and 15 per cent to India’s
total merchandise exports.
 Its contribution to foreign exchange earning stood at UDS 38.59 billion in 2016.
 It also employs over 4.64 million workers and is expected to employ 8.23 million by 2022. One of the fastest growing
sectors, it is extremely export oriented and labour intensive.
 It contributes 29 per cent to the global jewellery consumption.
 India exports 75 per cent of the world’s polished diamonds.
 Gold demand in India rose to 338.70 tonnes between January to June 2018.
 India's gems and jewellery exports stood at US$ 13.18 billion between April - August 2018*. During the same
period, exports of cut and polished diamonds stood at US$ 10.31 billion, thereby contributing about 78.22 per cent
of the total gems and jewellery exports in value terms. Exports of gold coins and medallions stood at US$ 201.75
million and silver jewellery export stood at US$ 239.04 million between April – August 2018.

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Pre GST Post GST
Excise duty @ 1% GST @ 3%
State VAT in range of 1% – 1.2%
highest being 5% in the state of
Kerala.
Un finished Precious and Semi-
Precious stones attracted GST @
0.25%.
Wef 18/03/2018 all types of Precious
stones attracts tax rate of 0.25%
Import Customs Duty of 10%. Import Custom Duty continues on
import at 10% on Gold as well as
Precious stones
Import – Ed. Cess + SHEd Cess –
3%
Import : Social Welfare Surcharge @
10% wef 2nd Feb’18

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S.
No.
Particulars HSN/ SAC
Code
GST Rate
1. Rough and un-worked diamonds, precious and semi-
precious stones
7102, 7103,
7104
0.25%
2 all types of Precious and semi-precious stones 7102, 7103,
7104
Polished Diamond 3%
upto 17
th
Mar’2018
0.25% Wef 18
th
Mar’2018
3. Pearls, Gold, Silver, Articles of jewelry of gold, silver, etc 7106, 7108,
7113, 7118
3%
4 Job work in relation to cut and polished Diamonds, plain
or studded jewellery of gold, silver, etc
9988 5%
5 Repairing Charges & Other Professional, Technical and
business services (residuary clause)
998399 18%

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S.
No.
Particulars HSN/ SAC
Code
GST Rate
1. Gold Bullion 7108 3%
2 Silver Billion 7106 3%
3. Articles of jewelry and parts thereof, of precious
metal or of metal clad with precious metal (even
studded with diamond / other stones
7113 3%
4. Articles of goldsmiths’ or silversmiths’ wares and parts
thereof, of precious metal or of metal clad with precious
metal
7114
5. Articles of natural or cultured pearls, precious or semi-
precious stones (natural, synthetic or reconstructed)
7116 3%
6. Imitation jewelry 7117 3%
7. Gold / Silver Coin 7118 3%

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Case -1 : Sales Transaction : Single Price inclusive of Making Charges
Customers walks into a Jeweler showroom and buys a Gold ornament worth Rs. 1,00,000 – Single Price – No
Split of Making Charges Shown
Supply of Jewelry
Applicable GST Rate @ 3%
Making Charges
Naturally Bundled
Treated as Composite Supply
Principal Supply – Gold;
Allied Supply - Making Charges
Invoice
Value of Jewelry 1,00,000
GST @3% 3,000
Total Inv. Value 1,03,000
Sec. 8 of
CGST/SGST Act
defines tax liability
on Composite and
Mixed Supplies.
However it is to be identified in each case what is the Principal Supply involved in the Composite supply
It is important to note that the making charges should not be confused with the Job work in relation to Gold. 5% rate of
Job work charges shall be applicable on the charges paid by the Jeweller to the Karigar (Job worker). Making charges
@ 18% as per residuary clause:
Other professional, technical and business services -998399.

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Final price of the jewellery
=
Price of (22 KT or 18 KT) gold
X (Weight in grams)
+
Making charges
+
GST at 3% on (Price of
jewellery + making charges)
Suppose the price of gold listed by the jeweller is Rs.
27,350 for 10 grams of 22KT gold. Now, if you wish to
purchase a gold chain of 9.6 grams, then price will be
calculated as:
Price of 1 gram of gold = Rs. 27,350 divided by 10 = Rs.
2,735
Price of 9.60 grams' gold chain = Rs 2,735 times 9.60
grams = Rs 26,256
Add making charges, suppose 10%, which comes to Rs
2,625.60 (10% of Rs 26,256)
Add GST at 3%: Rs 866.44 (3% of Rs 28881.60)
The final billing amount will be Rs 29,748.04 (Rs 26,256 +
Rs 2,625.60 + Rs 866.44)

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Case - 2 : Sales Transaction : Making Charges Shown Separately
Supply of Jewelry
Making Charges
Naturally Bundled
Principal Supply – Gold;
Allied Supply - Making Charges
Invoice
Value of
Jewelry
1,00,000
GST @3% 3,000
Total Inv.
Value
1,03,000
Customers walks in to a Jeweler showroom and buys a Gold ornament worth Rs. 1,00,000 and the
Jeweler charges separately for Gold and making charges (Rs 90,000 + 10,000)
Is it necessary to write making charges separately while raising invoice to the customers?
Ans- If the international standards are to be adopted making charges and wastage must be written separately
while rising invoice to the customer.
However, government has stated that jewellery will be taxed at 3% and hence there is no need to write making
charges separately.

Different Opinion : Making Charges Separately Shown
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In case, the consideration for both Gold and making charges have been disclosed separately in the
invoice by the Jeweller, the supplies will be taxable at their respective applicable rates, i.e. Gold @ 3%
and making charges @ 18%.
Invoice
Value of Gold 90,000
GST @3% 2,700
Making Charges 10,000
GST @ 18% 1,800
Total Invoice Value 104,500
This is a Wrong Practice
At the time of selling jewelry, can we mention break-up of commodity price and making charges separately, in
terms of the practice followed prior to GST?
Since the supplier is making sale of finished jewelry, the invoice should mention only the value of jewelry sold along
with its HSN. However, if, in terms of trade practice, it is necessary to provide a price break-up, the same may be
provided on the invoice or as an enclosure thereto.
Break-up of Price

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At the time of selling jewellery, can we mention break-up of
commodity price and making charges separately, in terms of the
practice followed prior to GST?
Since the supplier is making sale of finished jewellery, the invoice should
mention only the value of jewellery sold along with its HSN. However, if,
in terms of trade practice, it is necessary to provide a price break-up, the
same may be provided on the invoice or as an enclosure thereto.
Break-up of Price

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Case - 3 : Sales Transaction : Diamond Studded Jewelry
Customer want to Buy a Diamond Studded Gold Jewelry
Supply of Jewelry
Diamond
Applicable GST Rate @
0.25%
Naturally Bundled
Principal Supply – Gold Jewelry;
Allied Supply - Diamond
Invoice
Value of Diamond
Studded Jewelry
1,00,000
GST @3% 3,000
Total Inv. Value 1,03,000
Sec. 8 of
CGST/SGST Act
on Composite and
Mixed Supplies.
In Case of Diamond jewellery, diamonds which attract tax @ 0.25% are studded in the jewellery leviable to tax @ 3%. Though
diamonds attract lower rate of tax and might weigh more in terms of Price but as the Jewellery is the Principal Supply the
diamond jewellery would attract tax rate @ 3%.
Note : Split Pricing by Showing Jewelry Price and Diamond Price Separately and accordingly applying GST Rates is
Not Legally Sustainable.

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Many Jewellers come out with Promotional schemes wherein the customer is being offered high end watches,
Gifts etc. along with the supply of jewellery.
Supply of Jewelry
Watch
Applicable GST Rate @
18%
Mixed Supply
Highest Rate Applicable
In my opinion the car, watch etc. are given to promote the trade of jewellery and hence treated as mixed
supply and therefore Highest Rate is Charged.
Case - 4 : Promotional Schemes
Sec. 8 of
CGST/SGST Act
on Composite and
Mixed Supplies.

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Supply of Jewelry
Lottery Ticket
Income Tax :
The income will be taxable at the flat rate of 30% which after adding cess will amount to 30.9%.
Lottery Won
Car Given as Gift
No Consideration
No GST
Invoice
Value of
Jewelry
1,00,000
GST @3% 3,000
Total Inv.
Value
1,03,000
Case - 5 : Promotional Schemes : After Sale Gifts through Lottery

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Many Jeweler get the jewelry manufactured from Karigars (Job Workers) which attract tax rate of 5%. The
registered Job worker shall charge GST of 5% and collect it form the jeweler on whose goods the job work has
been done.
Sec. 2(68) of CGST Act defines Job Work to mean any treatment or process undertaken by a person on goods
belonging to another registered person and the expression “job worker” shall be construed accordingly.
Thus any Karigar who performs any job on the goods of the supplier shall only be treated as Job Work under
GST leviable to tax at the rate of 5%.
Jeweler Sends for Job Work
Karigar (Job
Worker)
Returns within 1 Yr – Charges GST on Job work Charges @5%
In case Job Worker is not Registered, he should not Collect any GST. Then the Liability of Paying
GST is on Jeweler on RCM basis under Sec 9(4). However Payment of RCM is Differed till 30-9-2019
Case - 6 : Sending for Job Work to Karigars

Job Work
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Is it necessary to prepare Deliver Challan while issuing goods to “Karigar”?
Ans- Yes, otherwise goods can be confiscated.
Sometimes, one “karigar” directly send goods to another “Karigar” in that case is
it necessary to prepare Deliver Challan etc.?
Ans- Yes, otherwise goods can be confiscated.
•What would be the treatment in case where alloy is mixed by job worker in
jewellery?
•Under GST, the aforesaid supply should be considered as composite supply,
wherein, supply of services would be the principal supply. Accordingly, on the
entire value (including value of alloy), GST would be charged at the rate of 5%

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Can the job worker sell directly any waste and scrap generated during the job work?
Ans. Yes, subject to payment of tax and job worker is registered otherwise principal has to
discharge the tax liability.
Is it Required to Submit Intimation
It is clarified through Clarified vide Circular No.38/12/2018 – Central Tax dated 26th March,
2018
that it is the responsibility of the principal to include the details of all the challans relating to
goods sent by him to one or more job worker or from one job worker to another and its return
therefrom. The FORM GST ITC-04 will serve as the intimation as envisaged under section 143
of the CGST Act
Job Work

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It is clarified that a job worker (Karigar) is required to obtain registration only
in cases where his aggregate turnover, to be computed on all India basis, in a
financial year exceeds the threshold limit.
Job worker
To
Register when
Threshold Limit
of Rs 20 L / 10L is Crossed
When sending the Goods to another
Job Worker or Makes Further Supply
(Otherwise Principal has to make Job Worker’s Place as his
Additional Place of Business)
Required to Register Even
when Inter-State Transaction
of Goods Sending back to Principal
When Turnover is within Threshold Limit
Note : If some treatment or process is undertaken by a job worker on goods
belonging to an unregistered person, it will not be considered as job work
SN Panigrahi
Job-workers making Inter-State supply
of Services to a Registered Person –
Aggregate Turnover < Rs 20 L
Exemption will not be available to job
work in relation to jewellery, goldsmiths’
and silversmiths’ wares as covered
under Chapter 71 which do not require e-
way bill.
Notf : No. 07/2017-Integrated Tax, dt. 14th
Sep’17

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Is “Karigar” required to take GST number?
Ans- Yes, if his income from making his jewellery exceeds from Rs.20 Lacs per annum than he must
obtain GST number.
If a registered jeweler gets his job work done from outside “Karigar” then how GST will be
applicable?
Ans- If a “Karigar” is also registered under GST then he will recover GST on making charges from
jeweler. But if “Karigar” is not registered than jewelers will have to pay tax on making charges paid to
“Karigar”.

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It is pertinent to note that many jewellers though indulge in the repairing of the old and
worn out jewellery but this may not be considered as job work as the goods are of un
registered consumers and would be termed as labour work leviable to GST at 18%.
It is important to note that the making charges should not be confused with the Job work in
relation to Gold.
5% rate of Job work charges shall be applicable on the charges paid by the Jeweller to the
Karigar (Job worker).
How will GST apply if a customer wants to convert a chain to a mangalsutra?
Whether Termed as Repairs ? Or Job Work?
Case - 7 : Repairing of the Old and Worn out Jewellery
How the GST will be applied on repairing of jewellery?
Ans- GST will be applied on repairing charges only. However if some gold is
added while repairing goods, GST is used to be paid on additional gold used
for repairing.

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Customer owns 20 gm gold and gets a gold bangle made from the Jeweller. The Jeweller
charges Rs. 5,000 as making charges from the customer and pays Rs. 2,000 to the Karigar
How to Charge GST?
The supply of gold by the customer to the Jeweller for the purpose of making bangles will not fall under the
definition of “Job work” under the GST Act due to the fact that the customer will be an individual who is not a
registered person under the GST Act.
As per section 2(68) of the CGST Act, job work means any treatment or process undertaken by a person
on goods belonging to another registered person and the expression “job work” shall be construed
accordingly.
Therefore, the concessional rate of 5% of Job work in relation to gold shall not apply in the instant case and
the Jeweller shall charge GST @ 18% on the making charges.
It is to be noted that the making charges paid by the Jeweller to the Karigar (job worker) will attract GST @
5% under reverse charge (assuming that the Karigar is not a registered person).
Customer
URP
Jeweler
Registered
Karigar
Job Worker
Gives Gold
Gets a Gold Bangle
GST @ 18%
Gives Gold
Gets a Gold Bangle
GST @ 5%
Not Treated as Job Work Treated as Job Work
Case - 8 : Making Charges & Job Work

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A customer wants to exchange a coin / bullion into ornaments how GST will be applied?
Customer
URP
Sells Coin / Bullion worth Rs 50,000 Jeweler
Ornaments – GST @ 3% on Total Value : Gold + Making Charges
ie on Rs 1,00,000
Since Gold Converted into Ornaments
Gets back Ornaments – Worth 1,00,000
Not Treated as Supply – No GST
Customer
Value of
Gold
50,000
No GST 0
Total Value 50,000
Jeweler
Value of
Jewelry
1,00,000
GST @ 3% 3,000
Total Value 1,03,000
Case - 9 : Exchange a Coin / Bullion into Ornaments

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Jeweler Purchases old Ornaments from Unregistered Individual and then Sells to others the
Same after minor processing like Polishing
Customer - 1
URP
Individual
Jeweler
Registered
Customer - 2Sells
Old Ornaments
Sells Same
Old Ornaments
After polishing
Valuation of Old Jewellery on Sale as per Rule 32(5) of the Valuation Rules
As per Rule 32(5) of CGST Rules, 2017, the value of supply in case of a person dealing in buying and selling of second hand
goods, shall be the difference between the selling price and the purchase price. However, the following conditions need to be
fulfilled:
a. used goods are sold as such or after minor processing which does not change the nature of the goods
b. no input tax credit has been availed on the purchase of such goods
Therefore, in view of the above provisions, a Jeweller need not charge tax on the entire value of second hand goods. GST
should be charged only on the differential value. This is based on the fundamental concept of GST that tax should be levied
only on the value addition since the purchase price of the second hand goods has already suffered tax at the time of its original
sale.
Not Treated As Supply
No GST
Treated As Supply
GST Applicable on Margin
Margin = Selling Price – Buying Price
Case - 10 : Buying & Selling of Old Ornaments

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Customer - 1
URP
Individual
Jeweler
Registered
Customer - 2
Sells
Old Ornaments
Re-Made
Ornaments
After Melting
Not Treated As Supply
No GST
Treated As Supply
GST Applicable on Transaction Value
Margin Scheme Not Applicable
In cases where the old jewellery is completely remade after melting or it is not
possible to substantiate that only minor processing has been done, it is
advisable that the Jewellers charge GST on the entire value of old jewellery
being sold.
Case - 11 : Old Jewelry is Completely Remade after Melting And Sold

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There are many suppliers of jewellery who are registered in one State but may have to visit
other States (other than their State of registration) and need to carry the goods (such as
jewellery) along for approval.
Circular no. 10/10/2017 dtd. 18/10/2017
Jewelry on Approval Basis under Delivery Challan
Customer
State B
When Supply Fructifies issues Tax Invoice Charging IGST
Jeweler
State A
Movement of goods for other than supply like approval etc can be done on the basis of a Delivery
Challan and as soon as the Supply fructifies the Tax Invoice be issued.
It is further clarified that all such supplies, where the supplier carries goods from one State to another and
supplies them in a different State, will be inter-state supplies and attract integrated tax in terms of Section
5 of the Integrated Goods and Services Tax Act, 2017.
Case - 12 : Sending on Approval Basis

Sending on Approval Basis
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My man takes 20kg. Goods to different states of which he brings back some goods and he sales
some goods, how SGT will be levied?
Ans- GST will be levied on all goods which are sold, but he cannot take goods to other states where
you don’t have office and where you have not applied for casual taxable number in that state.
However vide Circular no. 10/10/2017 dtd. 18/10/2017, allowed to take goods for Approval Basis

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If the goods are transferred for exhibition to a different state how
GST will be levied?
Ans- GST is always levied on supply but when the goods are taken
to the exhibition there is no supply hence, GST shouldn’t be levied.
Circular no. 10/10/2017 dtd. 18/10/2017
Note : Participation in Exhibition, Registration as Casual
Taxable Person is Required as per Sec 27 of CGST Act
Case - 13 : Transferred for Exhibition to a Different State – Casual
Registration

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It is to be noted that e way bill has become mandatory for interstate
movement of goods wef 1st April, 2018 however as per Annexure to
Rule138 (14) following goods are exempted for generation of e way bill
which includes:
Sr. No. Description of Goods
4. Natural or Cultured Pearls and Precious and Semi-Precious Stones;
Precious Metals and Metals Clad with Precious metal (Chapter 71)
5. Jewellery, Goldsmith’ and Silversmiths’ wares and other articles
(Chapter 71)
Effectively, the exemption covers entire Chapter 71 of Customs Tariff Act
1975 and hence E way bill is exempted for gems and jewellery.
Case - 14 : e Way Bill : Exemption

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Seamless Input tax credit is the backbone of Goods and Service Tax. A
jeweler is also eligible to claim ITC of all inputs, capital goods, packing
material etc. except those barred by Sec. 17(5).
Case - 15 : Input Tax Credit & Credit Refund
Inputs : Gold
Precious (Diamond) & Semi-
Precious Stones
Packing Materials
Other Inputs & Capital Goods
Services: Karigar Charges
GST Paid
Jeweler
Eligible to Take
Input Tax Credit
under Sec 16
Subject to
Sec 17(5)
GST Paid /
Payable
Outward
Supply
Gems &
Jewelry

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In case of Imitation Jewelry which are also taxable @ 3% whereas the inputs & raw material like
Copper etc. are taxable at 18%, Packing Material at 12% / 18%. The manufacturer is eligible to
claim Refund of accumulated credit as it amounts to Refund of inverted tax structure u/s 54 of
CGST Act.
Case - 16 : Imitation Jewelry – Inverted Tax Structure
Under Section 54(3) of the CGST Act a registered person may claim refund of unutilized input credit
where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax
on outward supplies, other than nil rated or fully exempt supplies.
Inputs subject to tax at a higher rate than the rate applicable on outward supplies
of goods or services commonly known as ‘inverted tax structure’ could result in a
situation where the registered person has accumulated input credit.
Inputs : Copper & Alloys
Packing Materials
Services: Karigar Charges
GST 5% / 12% / 18%
Jeweler
Imitation
Jewelry
GST @ 3%
Accumulated ITC Claim Refund

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Purchases Attracts
RCM under Sec 9(4)
Jeweler
To Pay GST on
RCM
However Differed till
30-09-19
No Need to Pay
GST
Case - 17 : Supply From Un-registered (Business) : Liability to
Pay GST on RCM
Inputs : Gold, Copper & Alloys
Stones, Packing Materials
Services: Karigar Charges,
Designer & House Keeping
Services
Notification No. 22/2018 – Central Tax (Rate); 6th August, 2018
Supplier Un-Registered
Business

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Sale of old Jewelry by an Individual to a Jeweler
Old to Gold
Individual
Un-Registered
Registered
Jeweler
Old Ornaments
New Ornaments
Exchange

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Individual
Un-Registered
Old Ornaments
Jeweler
RegisteredConsideration
Is it Supply?
Even though the sale of old gold
by an individual is for a
consideration, it cannot be said
to be in the course or
furtherance of his business (as
selling old gold jewellery is not
the business of the said
individual), and hence does not
qualify to be a supply per se.
No GST Applicable
Whether GST Payable
on RCM?
Since the Transaction is Not
Treated as Supply Sec 9.4 shall
not be applicable.
No GST Applicable
On RCM
Case - 18 : Supply From Un-registered Individual

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Individual
Un-Registered
Old Ornaments
Jeweler
Registered
New Ornaments
Value : 20,000
Value : 1,00,000
Case - 19 : Exchange offer : Valuation
Rule 27 of CGST Rules: Value of supply of goods or services where the Consideration is Not Wholly in Money:
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,-
(a) be the open market value of such supply;
Customer
Value of Gold 20,000
No GST 0
Total Value 20,000
Jeweler
Value of Jewelry 1,00,000
GST @ 3% 3,000
Total Value 1,03,000
Not Treated as Supply – No GST
GST Applicable on Open Market Value
The old jewelry given by the Customer does not constitute supply under GST law. As per section 7 of the CGST Act, one of the essential
elements of supply is furtherance of business of the person making the supply. In the instant case, sale of personal jewelry by a customer does
not constitute furtherance of business by the customer.
As regards the tax on the sale of new jewelry in return for the old jewelry, GST applicable on the Value as Determined by Sec 15 of CGST Act
read with Valuation Rules ie Value of New Jewelry Rs 1,00,000

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 It is observed that many Gems & Jewellery units are located in SEZs and they supply
goods to Domestic Tariff Area (DTA) in India.
 These transactions are to be treated as Inter State transaction as per Sec. 7(5) of IGST
Act while as per Sec. 30 of SEZ act it shall be considered as import of goods.
 With both of these laws in operation, the importer in DTA has to file bill of entry and has to
pay basic Customs duty as well as IGST.
 Though the importer (DTA Unit) is eligible for input tax credit of IGST paid this is an apt
case of double levy of tax i.e BCD and IGST.
Treated as Import. DTA Customer to File B/E
& Pay Customs Duty that includes IGST
Customer
DTA
Jeweler
In SEZ
Case - 20 : Supply by SEZ Units

In terms of Section 25(4) of the CGST Act, 2017, every person who is required to obtain separate registration for every branch located in
different state or union territory shall be treated as distinct persons.
Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as supply, liable to tax in terms of
clause 2 to Schedule I of the CGST Act, 2017.
Further, it is important to note that, supply of goods to a branch / unit located within the same State having separate registration would also be liable
to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).
Transfer of Goods within same GSTIN (GST Identification Number – Registration Number) will not be charged to GST.
Stock transfers to units in different states will be taxed under GST, and while that may increase working capital costs, it will allow set-offs as
well.
Unit - 1 Unit -2
Stock
Transfer
Same State
Same GSTIN
No GST
Unit - 1 Unit -2
Stock
Transfer
Different States /
Business Verticals
Different GSTIN
GST Applicable
Same Legal Entity
Same PAN
Same Legal Entity
Same PAN
Case - 21 : Stock Transfer of Goods Between Braches:

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 The Place of Supply provisions as applicable to the supply of goods are squarely applicable to gems
and jewelry trade.
 Accordingly, a jeweler who delivers the goods at its showroom/shop shall levy dual GST (CGST +
SGST) whereas where there involves movement of goods to other state the transaction shall be
treated as interstate supply and hence IGST would be levied.
 It is generally seen that the jewelers go to various markets across different states to procure raw
material/finished goods and take delivery there itself and to avail the credit of ITC gets tax invoice
from the supplier levying IGST.
 In such situation the supplier would get into trouble of not levying proper GST (CGST +SGST) and
hence the supplier need to keep proper record to determine that the goods have been destined to
other state.
Case - 22 : Place of Supply Provisions

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 The time of Supply though is different for goods and services, the common principle is that the
tax becomes payable on the basis of supply or advance receipt whichever occurs first.
 In case of jeweler, the tax becomes due when the jeweler receives payment or supplies the
jewelry whichever is earlier.
 Many jewelers also run Gold Deposit scheme wherein the investor makes monthly payment of
a fixed amount for 11 months and the jeweler contributes the 12th month instalment and
supplies jewelry to the tune of the total collection.
 In this circumstances the jewelry is supplied after the end of 12th month however the GST is
payable on the receipt of every instalment.
Case - 23 : Time of Supply

43
Whether advances received against supply of goods would attract GST?
Yes, advance will be liable to GST at the time when it is received from the customer. However, where
supply is made against such advances in the same tax period, the time of supply would be determined
based on the date of invoice. Thus, GST shall be payable on advances only to the extent supply against
the same have not been made during a tax period.
 However, It is important to note here that Vide Not. No. 66/2017 CT Dtd. 15/11/2017, the requirement
to pay GST on receipt of advance against the supply of goods has been removed and has given a
big relief to jewelers who are running this deposit scheme as now they have to pay tax only at the time
of supply of goods and not at the time of receipt of advance.
 It is to be noted that no such relaxation has been granted in case of Supply of Services (Job
Work/labour work).
Case - 24 : GST on Advance Payment

44
What will be the treatment for hallmarking charges recovered from Customer?
As per Section 15 of the CGST Act, 2017, the value of supply of goods shall include all incidental
expenses and any amount charged for anything done by the supplier in respect of the supply of
goods or services or both at the time of, or before delivery of goods or supply of services.
Accordingly hallmarking charges recovered from the customer shall be included in the
transaction value.
Further, the supply would be a composite supply, where the principal supply would be the
supply of jewelry.
Accordingly, GST shall be charged on total value at the rate applicable on the principal supply
(i.e. supply of jewelry). If charged separately (i.e. over and above the principal supply of goods),
the hallmarking charges are to be mentioned in the Invoice.
Case - 25 : Hallmarking Charges

45
What will be the treatment for goods sent for exhibition?
Where the goods are sent for display at an exhibition (including entailing inter-state movement) the same would not
constitute ‘supply’ under the GST regime as the same are not supplies made for a consideration. In context of such
movements
a. The consigner may issue a delivery challan in lieu of an invoice at the time of removal of goods for transportation
b. Since such movement is only under a delivery challan no liability arises as there is no invoice or payment As
regards the return movement, whereas the GST framework does not prescribe any mechanism, the goods may
be moved under the same delivery challan. To that extent, the delivery challan should explicitly state that the
goods covered thereunder are destined to come back post the exhibition.
However, for an exhibition-cum sale event, the dealer may qualify as ‘casual taxable person’ as the dealer would
undertake transactions involving supply of goods. In such a case the dealer would be required to obtain a temporary
registration in the State where the exhibition is held as well as pay an advance tax to the extent of his estimated tax
liability.
What will be the treatment where goods sent for display at an exhibition are supplied therefrom (after end of
the exhibition) to another State?
If the goods are sent directly from the location where the exhibition is held to the customer in another State, the
supplier needs to take registration as a casual taxable person and pay IGST in the State where the exhibition is held.
Case - 26 : Goods Sent For Exhibition

46
What would be the GST implication where goods are carried by representative of an entity to another
State[s]?
Where the customer is known, the goods may be moved on sale or approval basis to such customer, under a
delivery challan.
As and when the customer approves the goods, an invoice may be issued charging IGST.
However, where the customer is not pre-identified or where the goods are to be shown to various persons in
one or more States, the supplier will need to obtain registration as a casual taxable person in the respective
State[s].
The registration must be obtained at least 5 days prior to making any sales, and will be for a limited period of
time. The supplier has to pay an advance deposit of the estimated GST amount at the time of taking
registration, which can be adjusted for paying the GST on sales. If any balance amount of deposit is left, the
same will be refunded. Alternatively, the goods may be moved under delivery challan as ‘samples for display
purposes only’ and then brought back to the origin State. Interested customer may be requested to place
orders subsequently, based on which orders a separate inter-state supply, charging IGST, may be made.
Case - 27 : Goods Physically Carried by Representative

47
What would be the treatment for packing costs and freight charges recovered from
the customer?
As per Section 15 of CGST Act, 2017, the value of supply of goods shall include all
incidental expenses and any amount charged for anything done by the supplier in
respect of the supply of goods or services or both at the time of, or before delivery of
goods or supply of services.
Accordingly the said charges recovered from the customer shall be included in the
transaction value. Further, the supply would be a composite supply, where the principal
supply would be the supply of goods and GST shall be charged on total value at the rate
applicable on the principal supply. If charged separately (i.e. over and above the principal
supply of goods), the said charges are to be mentioned in the Invoice.
Case - 28 : Packing Costs and Freight Charges

48
Would any GST implication arise on irrecoverable processing loss in course of job
work?
In terms of Section 143(5) ‘any waste and scrap generated during the job work may
be supplied by the job worker directly from his place of business on payment of tax,
if such job worker is registered, or by the principal, if the job worker is not
registered’
However, the aforesaid provision does not cover process loss/ manufacturing loss
which is not recoverable. Ideally, to establish that such loss is within an acceptable
range, it should be within the limits as recognized in trade.
In terms of Foreign Trade Policy 2015-2020 issued by the DGFT, specific wastage
norms are prescribed for the jewellery sector ranging from 0.20% to 5% (depending
upon the nature of product).
Case - 29 : Processing Loss

49
What would the GST rate for intermediaries/ aggregators, who themselves
do not undertake any treatment or process on inputs?
For qualifying as job worker, the intermediary/ aggregator would be
required to carry some treatment or process. Absent the same, GST would
apply at the rate of 18%.
However, it may be argued that qua the principle who sends the goods to
the intermediary / aggregator, in substance, the latter would be
commercially perceived as a job-worker, and hence GST at the rate of 5%
should be applicable, though such view may be litigious.
Case - 30 : GST rate for intermediaries/ aggregators

Jewellery products containing watch
50
classification under Heading 9101
In re M/s. House of Marigold (GST AAAR Gujarat)
Advance Ruling Appeal No. GUJ/GAAAR/APPEAL/2019/03
Date of Judgement/Order : 28/02/2019
The Appellant M/s. House of Marigold (Prop. Ms. Shilpa Sanjay Choksi) is engaged in supply of articles,
consisting of gold, diamond, precious stones like ruby, emerald, sapphire, pearls etc., wherein a watch
movement is fitted. The various kinds of such articles sold by the applicant along with watch are as under:-
(a) Butterfly with a ring
(b) Bracelet
(c) Bangle
(d) Necklace
(e) Ring
The appellant filed an application for advance ruling before the Gujarat Authority for Advance Ruling (herein
after referred to as the ‘GAAR’), requesting to hold that the above articles fall under entry 13 of Schedule V to
Notification No. 1/2017- Central Tax (Rate) dated 28/6/17 prescribing rate of 1.5% CGST and 1.5% SGST. It
was argued by the appellant that the cost of the jewellery includes cost of Gold, Silver, Diamond etc. of very
high value but a watch is fitted in the jewellery selected by the customer, the cost of which is very nominal i.e.
not even 1% of total value. It was submitted that the customers intend to buy jewellery only. The appellant
referred to the definition of the term ‘jewellery’ given in various dictionaries and submitted that the articles
dealt with by the appellant fully satisfy the definition of the term ‘jewellery’. The appellant referred to Chapter
Note 9 of Chapter 71 of the Customs Tariff Act, 1975.

51
The meaning of expression ‘articles of jewellery’ for the purpose of heading 7113 has been given at
Chapter Note 9 of Chapter 71 of the Customs Tariff Act, 1975. However, the said Chapter Note does not
include the objects of personal adornment or articles of personal use containing ‘watch movement’.
On the other hand, Chapter Note 3(l) of Chapter 71 of the Customs Tariff Act, 1975 specifically excludes
articles of Chapter 91 (clocks and watches). The Chapter Notes of Chapter 91 of the Customs Tariff Act,
1975 as well as Explanatory Notes of Harmonised System of Nomenclature of Heading 9101 and 9102
covers watches with case wholly of precious metal or of metal clad with precious metal, or of the same
materials combined with natural or cultured pearls, or precious or semi-precious stones (natural, synthetic
or reconstructed).
Wrist-watches, pocket-watches, fob-watches, watches for carrying in handbags, watches mounted in
brooches, rings etc. are covered under Chapter 91 of the Customs Tariff Act, 1975. Therefore, on the
basis of relevant Chapter Notes of Customs Tariff Act, 1975 and Explanatory Notes of Harmonised System
of Nomenclature, we find that products supplied by the appellant are appropriately classifiable under
Chapter Heading 9101 of the Customs Tariff Act, 1975 and the GAAR has rightly held so.
In view thereof, we confirm the Advance Ruling No. GUJ/GAAR/R/2018/20 dated 10.10.2018 of the Gujarat
Authority for Advance Ruling and reject the appeal filed by House of Marigold (Prop. Ms. Shilpa Sanjay
Choksi).
Jewellery products containing watch
classification under Heading 9101

52
Issues Implications
Sale of Jewellery Taxable under GST.
Box packaging etc given free of cost with
Jewellery
No implication, the same form part of sale
value of goods.
Promotional Material given to distributors /
retailers
Such material is provided free of cost and is
and hence no tax is payable on such
transaction and in such a case credit availed
by the company would need to be reversed in
accordance with section 17(5) of the CGST
Act, 2017
Does IGST has to be paid on import of Gold Yes, IGST @3% has to be paid
Sale of Jewellery through consignment
stockist. What are the implications
Any supply of Jewelry to consignment
stockist would be leviable to
GST. Appropriate GST need to be charged
thereon at a value as provided in Section 15
of the CGST Act. Such consignment agent
can take credit of such value against his
output. He shall further raise invoice of
commission of which credit is available to the
consignor company.

53
Raw material (Gold) is given to Job Worker for
conversion in Jewellery. He also puts semi precious
stones in his work. What shall be the treatment of this
transaction?
If the goods are send under intimation and as per
prescribed procuedure, no GST is to be leveid on gold
supplied to jobworker and jewellery received back
from him. The job worker, if registered, would be
required to pay GST at the rate of 5% on job charges
only. He shall also charge applicable GST on semi
precious stones. If Job-worker is not registered,
principal shall pay tax under reverse charge and in
both cases, credit shall be available to him.
If a customer wants to exchange any jewellery after
making a purchase, what will the procedure?
A credit note for the earlier purchase would need to be
effected and a fresh invoice for new sale is required to
be issued
I have charged Rs 500000 for gold and Rs 50000 for
labour charges on Jewellery sold to customer. What
is the applicable rate of tax on the same?
The entire value shall be taxable @3% as labour
component is only a measure of value and not levy.
I purchase old jewellery at gold rate from a
housewife. Is it taxable under reverse charge?
No, since the person has not sold goods as supply in
course of business, the same is not taxable in GST
even under reverse charge.
My customer gives me gold for making jewellery and I
have also applied precious stones. What is the rate of
tax applicable?
You have to charge 5% on job charges and 3% on
precious stones. In case of

54
If a Jeweler sells gold ornament and also making jobwork charges above sale what
will be the applicable rate ?
The above situation is covered under the definition of composite supply which means as
follows :
As per sec 2(27), “composite supply” means –
a supply is comprising two or more goods/services, which are naturally bundled and supplied in with
each other in the ordinary course of business, one of which is a principal supply. The items cannot be
supplied separately”.
In such cases applicable rate will be of Principal Supply. Thus in above case principal supply
is sale of gold and not making charges and accordingly applicable rate on whole transaction
will be 3% .
If gold ornaments of 100 gms (with packing) is sold for Rs. 2,80,000/- and labour
charges totaling to Rs. 40,000/- is also charged on the same transaction, total value of
transaction being Rs. 3,20,000/- then what will be the tax liability?
ANSWER
In this case, even though individual components are for separate consideration GST shall be
levied on Total Transaction Value of Rs 3,20,000 @ 3%

55
How will the exchange of old jewellery worth Rs. 10,000 plus cash of Rs.
for new jewellery priced at Rs. 15,000 be treated under GST?
ANSWER
• GST is to be paid on the “open market value” (i.e. retail price) of the new item
of jewellery, i.e. Rs. 15,000.
• If the “open market value” is not known, GST will be paid on the amount of
money paid by customer plus the value of old gold jewellery given by
customer (i.e. Rs. 5,000 plus Rs. 10,000).

56
Is recycling of old gold taxable?
ANSWER
• Recycling process per se done for oneself, would not be liable to GST, and GST would only be
payable once there is a supply of the recycled gold to another person
• If gold is recycled for a specific customer, this would be treated as a supply of services, which is
liable to GST
For the buying of old items / scrap from individuals/ companies (from which gold can be recycled
extracted), GST will be payable by the recycler under reverse charge (if those persons are
unregistered), or by those persons (if registered). GST will be paid on the value which is paid by
recycler for such scrap.
If a customer gives an order for an ornament of 10 gms and he supplies 8 gms, will the GST be levied on
10 gms or 2 gms?
ANSWER
The delivery of 8 gms from the customer to the supplier is not a transaction of ‘supply’ as defined under
Section 7 of the CGST Act. Since the transaction value is the price paid for the supply made by the supplier,
GST will only be payable on the 2 gms supplied.
Separate bills should be raised for the 2 gms supplied (GST @3%) and for the labour charges (GST @5%).

57
Will I get input tax credit on handbags given to the customer as packing material?
ANSWER
Normally, packing material is an ancillary part of the supply of the goods. However, the
handbags are not the typical packing material.
If the handbags are given as complimentary items for free, no GST will be payable, the input
tax credit will have to be reversed.

58
Packing Material
a) Whether packing material or complimentary bags, which are distributed to customer needs to be billed
in the Invoice, if so, at what value?, if not does than whether it needs to be listed with zero value in the
invoice or can be omitted?
b) Since the value at which the packing material is sold will be usually zero price, whether input credit
will be available on GST charged by the supplier?
c) What kind of inventory records the dealer has to maintain for packing material?
ANSWER
a) There is no requirement to show the complimentary packing material in the invoice.
b) No input tax credit will be available if such bag is sold at zero price.
c) The dealer will have to maintain the same inventory details as for other goods – the bags can be shown under
supply as a gift.
However, such packing material are treated as part of the transaction included in the price,
then no need to Reverse input Tax Credit

59
In case of Repair, suppose some gold is added by us while repairing and single bill is prepared for
charge and Gold, then at which rate of GST will be applicable 3% or 5%?
• If invoice value has breakup of gold value and repair value separately?
• If invoice value does not have separate breakup of gold value and repair value?
ANSWER
• Ideally, separate bills should be prepared to avoid confusion.
• Where the invoice has a breakup, GST will be at 3% for gold and 5% for repair value (labour charges)
• Where there is no break-up in the invoice, this will be a mixed supply and tax should be paid at the higher
rate of 5%.
Suppose there is a purchase of old gold/ jewelry wherein a customer is selling back old jewellery (which he had
purchased 5 years back) and the repurchase price is INR 1 lakh. What is my tax liability on this repurchase of
INR 1 lakh?
ANSWER
If the customer (who sold the jewelry in this case) is unregistered individual then such transaction will not in the
course or furtherance of Business and therefore shall not be treated as supply, hence no GST Payable

60
What are the provisions of reverse charge applicable with regards to Job- Work charges ?
A. “Reverse charge”means the liability to pay tax by the recipient of supply of goods or services
or both instead of the supplier of such goods or services or both under sub-section (3) or sub-
section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the Integrated
Goods and Services Tax Act.
B. Thus if supplier of goods / services is unregistered and receiver is registered in that case GST will
be paid by the receiver at applicable rates i.e. 5% of Value.
e.g. ABC Jewelers (Registered under GST) supplies 10 kgs of raw gold to D (unregistered), a job-
worker for purification, finishing and other ancillary activities. D performs abovesaid work and charges
Rs.1000 for above job-work performed by him.
Now in this case ABC Jewelers are registered and availing supply from Mr.D who is unregistered and
accordingly tax will be paid under reverse charge by ABC Jewelers @ 5% (applicable rate for Job-
workers relating to Jewellery ) and credit of the same is available.

SN Panigrahi 61
CBIC exempts CGST on supply of gold by nominated agencies to registered persons
Notification No. 26/2018- Central Tax (Rate); 31st December, 2018
Exempts the intra-State supply of gold falling in heading 7108 of the First Schedule to the Customs Tariff
Act, 1975 (51 of 1975), when supplied by Nominated Agency under the scheme for “Export Against Supply
by Nominated Agency” as referred to in paragraph 4.41 of the Foreign Trade Policy, read with relevant
provisions of Chapter 4 of Handbook of Procedures, to a registered person (herein referred to as “recipient”),
from the whole of the central tax leviable thereon, under section 9 of the Central Goods and Services Tax
Act, 2017, subject to following conditions, namely:-
(i) the Nominated Agency and the recipient shall follow the conditions and observe the procedures as
specified in the Foreign Trade Policy read with Handbook of Procedures;
(ii) the recipient shall export the jewellery made out of such gold within a period of 90 (ninety) days
from the date of supply of gold to such recipient and shall provide copy of shipping bill or bil of export
containing detd Is of Goods and Services Tax Identification Number (GSTIN) alongwith the invoice for
exports to the Nominated Agency within a period of 120 (one hundred and twenty) days from the date of
supply by the Nominated Agency;
(iii) wherever such proof of export is not produced within the period mentioned in condition (ii), the Nominated
Agency shall pay the amount of central tax payable on the quantity of gold not exported, along with interest
from the date when the said tax on such supply was payable, but f or the exemption.

63
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SN Panigrahi

Contact Details:
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com 65

#GST on Gems & Jewelry : A Detailed Analysis# By SN Panigrahi

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