Understanding Goods and Services Tax on Diamond Jewelry in India
The Indian diamond jewelry sector faces complexities due to GST's inverted duty structure. Recent changes from the 56th GST Council meeting aim to resolve issues like ITC accumulation by adjusting rates on cut and polished diamonds. This article clarifies GST applicability, rates, and HSN codes for various diamond forms and jewelry. It also details GST calculation scenarios, rules for place and time of supply, e-way bills, e-invoicing, and ITC availability, including relevant advance rulings.
The diamond jewelry industry has experienced an inverted duty structure under the GST framework. To address the issue of input tax credit (ITC) accumulation in this sector, the 56th GST Council meeting introduced several modifications. This article delves into the current Goods and Services Tax applicability for diamonds and diamond jewelry, incorporating the recent changes made by the GST Council. The 56th GST Council meeting announced significant updates, effective from September 22, 2025. Notably, the Integrated Goods and Services Tax (IGST) on natural cut and polished diamonds, up to 25 cents (1/4 carat), imported under the Diamond Imprest Authorisation Scheme, has been reduced from 18% to Nil.
GST Applicability on Diamonds and Diamond Jewelry in India
Determining the GST applicability on diamonds and diamond jewelry can be complex, as this industry falls under various GST tax slabs. Let's clarify how GST is levied on diamond jewelry. Following the 47th GST Council meeting, the GST rate on cut and polished diamonds increased from 0.25% to 1.5%. This change superseded an earlier notification (7/2018- Integrated Tax (Rate), dated January 25, 2018), which had lowered the GST rate on only cut and polished diamonds from 3% to 0.25%. Furthermore, rough or sawn diamonds are subject to a 0.25% GST. The gems and jewelry industry continues to incur a 1.5% GST rate for job work charges and 18% for various input services, including grading, certification, and bank charges. While cut and polished diamonds attract a 1.5% GST, the taxation changes when these diamonds are crafted into wearable jewelry. Diamond jewelry is taxed at 3% and includes job work charges. These diamonds are often combined with other precious or semi-precious stones, which are subject to different GST rates.
Impact of GST on Diamond Jewelry
Before GST implementation, diamond jewelry was subject to a 1% excise duty and varying VAT rates across states (typically 1-1.2%, though some states like Kerala charged 5% VAT). Additionally, a 10% import duty was applicable. Post-GST, the effective rate on diamond jewelry is 3%. Unfinished precious stones attract a flat GST rate of 0.25%. The 10% import duty on diamond jewelry remains unchanged. To illustrate the GST impact, consider a diamond jewelry piece priced at Rs.1,00,000.
| Description | Pre-GST Price (Rs.) | Post-GST Price (Rs.) |
|---|---|---|
| Base Price | 1,00,000 | 1,00,000 |
| (+) Excise Duty @ 1% | 1,000 | - |
| (+) VAT @ 5% | 5,050 | - |
| (+) GST @ 3% | 3,000 | |
| Final Price | 1,06,050 | 1,03,000 |
This illustration demonstrates that prices have decreased under the GST regime due to the elimination of tax cascading effects.
GST Rate and HSN Code for Diamonds
To gain a clearer understanding of GST on diamond jewelry, here are the applicable GST rates and HSN codes. Note that job work for diamond jewelry falls under Heading 9988, categorized as