GST on diamond - Everything you need to know

Discover insights of GST on rough diamonds, polished diamonds, Input Tax Credit (ITC), compliance, pricing, imports/exports, and their impact on the diamond industry.
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3 min
06-July-2024

GST on rough diamonds

  • GST rate: Rough diamonds attract a GST rate of 0.25%
  • Applicability: The GST rate is applicable at the point of sale and purchase of rough diamonds
  • Compliance: Businesses dealing in rough diamonds must register for GST and comply with the filing requirements
  • Input Tax Credit: Businesses can claim the Input Tax Credit (ITC) on GST paid on purchases of rough diamonds
  • Export: Rough diamonds are zero-rated under GST, facilitating a competitive edge in international markets

GST on polished diamonds

  • GST rate: Polished diamonds attract a GST rate of 3%.
  • Applicability: The GST rate is applicable on the sale and purchase of polished diamonds
  • Compliance: Sellers must ensure proper invoicing and GST return filing
  • Export: Polished diamonds are zero-rated under GST to boost exports
  • Input Tax Credit: ITC can be claimed on GST paid for inputs used in polishing diamonds
  • Inventory: Businesses must maintain detailed records of inventory for compliance purposes

For troubleshooting GST compliance issues, learn about potential challenges like the GST site not working and how to resolve them.

Input Tax Credit (ITC) in diamond Industry

  • Eligibility: Businesses can claim Input Tax Credit (ITC) on GST paid for inputs and capital goods
  • Documentation: Proper documentation is essential to claim ITC.
  • Conditions: ITC can be claimed only if the supplier has deposited GST with the government
  • Reconciliation: Regular reconciliation of purchase and sales data is required
  • Utilisation: ITC can be utilised for payment of output GST liability

To track GST refunds for ITC claims, check out the guide on how to track GST refund status to streamline your processes.

Compliance and documentation

  • GST registration: Mandatory for businesses exceeding the threshold limit
  • Invoicing: Proper GST-compliant invoices must be issued for all transactions
  • Filing returns: Regular filing of GST returns (GSTR-1, GSTR-3B) is required
  • Record keeping: Maintain detailed records of sales, purchases, and ITC claims
  • Audits: Businesses may be subject to GST audits and inspections
  • Training: Employees should be trained on GST compliance and documentation requirements

For understanding key GST features relevant to compliance, explore the features of GST to streamline your operations.

GST impact on diamond jewellery

Aspect Before GST After GST
Tax structure Multiple taxes (VAT, Excise) Single tax (GST)
Tax rate Varied (1%-12%) Standardised (3%)
Compliance Complex, multiple filings Simplified, single filing
Input tax credit Limited ITC availability  
Export Multiple procedures Zero-rated, streamlined
Working capital Blocked in taxes Improved due to ITC
Business loan Higher interest due to complexity Potential lower rates due to simplicity


GST rate and HSN code for diamonds

Diamonds, being a high-value commodity, have specific GST rates  and HSN codes for categorisation under the Indian GST regime. Below is a detailed table outlining the GST rates and HSN codes applicable to various types of diamonds:

Description HSN code GST rate
Synthetic or reconstructed diamonds (Unworked or simply sawn, cleaved, or bruted) 7102 0.25%
Diamonds (Unworked or simply sawn, cleaved, or bruted) 7102 0.25%
Diamonds (Industrial, unworked or simply sawn, cleaved, or bruted) 7102 0.25%
Diamonds (Non-industrial, cut, or otherwise worked but not mounted or set) 7102 0.25%
Synthetic or reconstructed diamonds (Non-industrial, cut, or otherwise worked but not mounted or set) 7102 0.25%
Waste and scrap of diamonds 7102 0.25%


How to calculate GST on diamond jewellery?

  • Determine the value of the diamond jewellery, including the cost of diamonds and making charges.
  • Apply the GST rate of 3% to the total value.
  • Add the GST amount to the value to get the total price.
  • Example: If the value is ₹1,00,000, GST = 3% of ₹1,00,000 = ₹3,000.
  • Total price = ₹1,00,000 + ₹3,000 = ₹1,03,000.
  • Use a GST calculator to simplify the calculation process.

Advance rulings related to GST on diamonds

  • GST classification: Advance rulings help in classifying diamond types under GST.
  • Rate clarification: Specific rulings provide clarity on applicable GST rates for different diamond forms.
  • Export procedures: Rulings aid in understanding GST procedures for diamond exports.
  • ITC eligibility: Clarifications on ITC claims for diamond businesses.
  • Compliance: Helps in understanding compliance requirements and avoiding litigation.
  • Business strategy: Advance rulings assist in strategic planning and pricing.

GST on diamond imports and exports

  • Import GST: Applicable GST on diamond imports must be paid at customs.
  • Export GST: Diamonds exported are zero-rated under GST.
  • Documentation: Proper documentation is required for claiming GST refunds on exports.
  • ITC: Importers can claim ITC on GST paid during import.
  • Compliance: Adhering to import and export regulations is crucial.
  • Business loan: Importers and exporters can avail of business loans for managing GST-related cash flow.

Proper documentation is critical for GST refunds on exports. To simplify compliance, understanding the place of supply in GST is essential for businesses operating across borders.

Conclusion

Understanding the GST implications on the diamond industry is crucial for compliance and optimising financial management. Proper documentation, compliance with GST regulations, and leveraging the Input Tax Credit (ITC) can enhance business operations. Additionally, businesses can benefit from availing of a business loan to manage working capital effectively in this dynamic industry.

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Frequently asked questions

What is the applicable GST rate on diamonds in India?
In India, the applicable Goods and Services Tax (GST) rate on diamonds is 0.25% for rough diamonds and 3% for polished diamonds and jewellery. Additionally, a 0.1% GST rate applies to the sale of diamonds at special notified zones. These rates are intended to streamline the taxation process within the diamond industry.
What is the GST rate on diamond jewellery in 2024?
In 2024, the Goods and Services Tax (GST) rate on diamond jewellery in India remains at 3%. This rate applies to the entire value of the diamond jewellery, including the cost of diamonds and the making charges. This ensures a consistent tax structure across the jewellery sector, promoting fair trade practices.
Why is GST 1.5% on diamonds?
GST on diamonds is set at 1.5% to balance revenue generation with the industry's growth. This rate ensures that diamonds remain competitive globally while preventing tax evasion. It supports the gem and jewellery sector, crucial to India's economy, by keeping the taxation fair and manageable for traders and consumers alike.
Is diamond covered under the GST bill?
Yes, diamonds are covered under the Goods and Services Tax (GST) in India. Rough diamonds attract a GST rate of 0.25%, while cut and polished diamonds are taxed at 3%. The GST aims to streamline the tax structure and ensure uniformity across the country, impacting the diamond industry by standardising the tax rates.
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