The diamond jewellery industry is affected by an inverted tariff structure under the GST regime. As a result, the 47th GST Council meeting voted to increase the GST rate on loose diamond polishing and cutting from 0.25% to 1.5%, with effect from July 18, 2022. This will end the diamond jewellery industry's accumulation of input tax credits.
Below, we explain what GST is on diamond jewellery and diamonds as of today, after revisions announced by the GST Council.
Since this industry comes under numerous GST tax slabs, the application of GST on diamonds and diamond jewellery can appear a bit complicated. Let us unravel the GST on diamond jewellery.
The GST rate on polished and cut diamonds was increased from 0.25% to 1.5% after the 47th GST Council meeting. This revision follows an original announcement in which the GST on diamonds was decreased from 3% to 0.25%.
In addition, sawn or rough diamonds are subject to a 0.25% GST. In addition, the gems and jewellery business continues to be subject to a GST rate of 1.5% for job work costs and 18% for certification, grading and bank charges, among other things, on input services purchased.
While polished and cut diamonds are subject to a 1.5% GST, the situation changes when these diamonds are used to make wearable jewellery. This is because diamond jewellery is taxed at 3% and includes job labour costs. These diamonds are often taxed at different GST rates than other precious or semi-precious stones.
Before the implementation of GST, diamond jewellery was subject to a 1% VAT as well as an excise charge, which varied across states and ranged between 1 and 1.2%. However, certain states, such as Kerala, levy a 5% VAT on diamond jewellery. In addition, diamond jewellery was subject to a 10% import charge.
With the advent of the GST system, the relevant GST rate on diamond jewellery is now 3%. Furthermore, unfinished precious stones are subject to a fixed GST charge of 0.25%. Diamond jewellery is still subject to a 10% import charge, as it was before.
With the gems and jewellery industry designated as a priority for export promotion, the Indian government has been working to rationalise the imposition of GST on diamonds, particularly given that cut, rough and polished diamonds account for more than 66% of gems and jewellery exports. The government is on track to settle the buildup of input tax credit claims on diamonds with the increase of GST on diamonds to 1.5%.
While the latest GST Council meeting reports reflect that there has been no rise in GST rates, it is still critical to keep track of your tax payments and other costs. Fi's AI-powered Analyser can provide insights to help track your expenses: Analyse your spends by Merchants/Brands, Categories (like Food, Entertainment) & by Time (daily/monthly spends). FYI: Fi also provides thoughtful, non-intrusive nudges to help you maximise your savings/investments. Want to know your credit score? The Insights Hub on our Analyser can do that too. This is why over 2.5 million people trust Fi to get a 360-degree view of their money.
In 2023, the rate of GST on diamond jewellery is 3%.
On unworked and rough diamonds, the appropriate GST rate is 0.25%. The GST rate on polished and cut diamonds, on the other hand, is 1.5%.
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