GST on Gold Jewellery in India 2026 — The Number Your Jeweller May Not Be Telling You

Most people assume buying gold is simple. You pay the price. You pay 3% GST. Done. But there is a version of that same transaction where the GST on a single necklace is calculated three different ways — and the customer who doesn't know this is quietly paying for someone else's compliance shortcut.

A purchase you've probably already made

Picture this. You walk into a jewellery shop in Mumbai. You buy a gold necklace — 20 grams, set with a few diamonds, with a making charge for the craftwork. The jeweller hands you a bill. You check the gold price, nod, and pay.

Most people stop there.

But look at that bill again — specifically the GST section. Does it show one rate? Or three?

Under Indian GST law, a single jewellery invoice is required to carry three separate rates applied to three separate line items. The gold itself. The making charges. The diamonds. Each has its own HSN code, its own rate, its own legal basis in the CBIC notification.

A bill that shows "GST: 3%" on the entire amount is not just simplified. It is technically non-compliant — and it either over-collects or under-collects depending on which number the jeweller blended.

How the three rates work — and why they exist

The GST Council did not make gold complicated to be difficult. Each rate reflects a different economic reality.

Gold at 3% (HSN 71131910) is taxed lightly because it functions partly as an investment — a store of value — not just a consumer product. Taxing it at 18% would push transactions underground, which the Council wanted to avoid.

Making charges at 5% are a service — the goldsmith's labour — not a good. Services have their own rate structure. The fact that they appear on a goods invoice does not change their classification.

Diamonds at 0.25% (rough) or 1.5% (polished, HSN 71023100) reflect India's position as the world's largest diamond cutting and polishing hub. Low rates keep the industry competitive globally.

Understanding why the rates exist makes them easier to remember — and harder to miss on an invoice.

The complete HSN map — every precious metal and stone

What a fully correct invoice actually looks like

Here is the same necklace — 20 grams of gold, ₹12,000 making charges, polished diamonds worth ₹25,000 — billed the right way.

Now look at what happens when a jeweller applies a single blended 3% to the entire ₹1,77,000:

GST collected: ₹5,310. Correct GST: ₹5,175. Difference: ₹135 over-collected from the customer. The jeweller has also under-collected on making charges and over-collected on diamonds — two separate misclassifications on one invoice. If this jeweller is audited, both errors appear simultaneously.

The customer paid more than they owed. The jeweller is still non-compliant. Everyone loses — except the person who drafted a vague invoice.

Gold-only purchase — quick reference at today's prices

These figures are for intrastate purchases — buyer and seller in the same state. If you are an NRI buying from a jeweller in a different state, or a business purchasing gold across state lines, IGST 3% applies as a single line item. The amount is identical. Understanding when each applies is covered in the CGST, SGST and IGST explainer.

The old gold exchange — where the most confusion lives

When you walk into a jeweller with 15 grams of old gold and walk out with a new necklace, what just happened from a GST perspective?

The old gold you brought in is treated as a purchase by the jeweller — from an unregistered person (you). The new jewellery is a taxable supply to you. In a correctly structured exchange, GST applies only on the net value — the price of the new jewellery minus the credit for the old gold. If you hand in old gold worth ₹1,05,000 and buy new jewellery worth ₹1,40,000, GST should technically apply on the ₹35,000 differential.

In practice, many jewellers apply GST to the full value of the new jewellery. Some apply it to nothing. Neither is fully correct in every situation. The right answer depends on the exchange structure and whether the jeweller is issuing a proper tax invoice or a retail invoice.

A CA can confirm the correct treatment for your specific transaction. The point here is simpler: if you have ever done a gold exchange and wondered if the GST on your bill looked right — you were asking the right question.

ITC — what jewellers recover, what customers never see

Here is a number that rarely appears in any discussion about buying gold.

A registered jeweller who buys raw gold from a refinery pays 3% GST on that purchase. When they sell the finished jewellery, they collect 3% GST from the customer. The GST they paid on the raw material is claimed back as Input Tax Credit — ITC. The net GST they actually remit to the government is only on the value they added at their stage: the making charges, essentially.

The customer, however, cannot claim any of this back. The 3% on gold, 5% on making charges, and 1.5% on polished diamonds paid by an individual buying jewellery for personal use is a pure cost. There is no ITC. No recovery mechanism. The only tax benefit is the Section 80D deduction on the premium — applicable only to health insurance, not jewellery.

This is worth knowing simply because it clarifies the total cost of ownership. What you pay in GST at the jeweller's counter stays paid.

The four invoice errors that lead to notices

The CBIC has been consistent in its scrutiny of jewellery invoices. These are the four errors that appear most frequently in notices to jewellers and their software vendors:

• One rate for everything. Blending gold, making charges, and diamonds into a single 3% calculation. Technically wrong in three ways simultaneously.
• Making charges buried in gold value. Showing making charges as part of the gold price to avoid the 5% service rate. The jeweller saves paperwork. The invoice is non-compliant.
• Wrong diamond HSN. Filing polished diamonds (71023100, 1.5%) under the rough diamond code (71023900, 0.25%). On a ₹5 lakh diamond, that is ₹6,250 in under-collected GST per transaction.
• No CGST/SGST split. Showing a single "GST 3%" line rather than separate CGST and SGST amounts. A mandatory requirement on every GST invoice that is routinely omitted on handwritten bills.

Each of these errors is individually correctable. A jeweller who gets a notice for any of them needs to revise past invoices, pay the differential, and explain the discrepancy. The correction cost is almost always higher than the original compliance cost would have been.

For jewellery billing software: how this gets handled correctly

A jewellery billing platform — whether it is a custom POS, a cloud billing tool, or an e-commerce catalogue — faces the same problem at scale. Every transaction needs three HSN codes looked up, three rates applied, three line items generated, and CGST/SGST split correctly based on whether the buyer is in the same state.

The developers who built these platforms in 2020–2022 hardcoded the rates. The September 2025 GST reform changed rates across hundreds of product categories. Gold at 3% survived the reform unchanged — but the developers who hardcoded it have no mechanism to know that. They also have no mechanism to handle a future change if it comes.

A billing system that resolves HSN codes dynamically — rather than storing them — does not have this problem. The rate lookup happens at invoice generation time. When the rate changes, the next invoice automatically reflects the new rate. No code change. No release. No risk of issuing invoices at the wrong rate for six months before anyone notices.

Here is what that lookup looks like in practice:

# Gold jewellery — direct HSN lookup
curl -X GET https://gstaccelerator.in/v1/hsn/71131910 \
  -H "X-API-Key: your_key"

# Response — every field your invoice line item needs
{
  "hsn_code": "71131910",
  "description": "Jewellery and parts thereof of gold",
  "tax_rates": {
    "igst": 3.0,
    "cgst": 1.5,
    "sgst": 1.5,
    "cess": 0.0
  },
  "notification_ref": "09/2025-CT(Rate), Schedule IV",
  "effective_date": "2025-09-22"
}

# Making charges — description lookup
curl -X POST https://gstaccelerator.in/v1/lookup \
  -H "X-API-Key: your_key" \
  -H "Content-Type: application/json" \
  -d '{"description": "goldsmith making charges labour jewellery"}'

# Returns: igst: 5.0, cgst: 2.5, sgst: 2.5

Two calls. Three rates. One invoice that a CA can sign off on without revision.

For platforms with large catalogues — jewellery e-commerce sites with hundreds of SKUs — the bulk classification endpoint processes up to 100 items in a single call. The same logic that makes one invoice correct makes ten thousand invoices correct, at the same speed.