GST INCASE OF GOLD REFINING AND MELTING JOBWORK

One of my clients is doing jobwork of refining and melting of gold , he is earning 8 to 9 lakhs yearly and doing work in local state therefore he is not liable for gst.

generally in his transaction what happen basically is that some one with raw gold comes to him for melting or refining that gold, he does melting or refining on that gold and that pure gold returned to customer and he issues his labour invoice to that cutomer for 5 rs. per gram.

Now question is that he has big furnace or called BHATHTHI to melt gold in that it requires minimum 1 or 2 kg gold to refine or melt, you can not melt small amount of gold in that.

so ease of transaction he takes/collects raw gold from his all customers for whole day and on the spot fine gold returned to his customer from his own gold stock immediately equal to purity of raw gold he received from his customer and issues labour invoice to his customer and then after at the end of the day he melted whole gold together collected during the day.

what ever gold stock he has it is his personal investment and it is shown in balance sheet as current asset.

so whether it affects gst?

Hey Rajdip, your client’s gold refining and melting jobwork scenario has some GST nuances. Let me break it down:

Key facts:

Client does jobwork (melting/refining) for others’ raw gold.
Charges labour fees (₹5 per gram).
Uses a big furnace requiring minimum ~1-2 kg gold to operate efficiently.
Collects raw gold from multiple customers, returns equivalent fine gold immediately from his own stock (equal in purity & weight).
Does actual melting/refining collectively at day-end.
Own gold stock is shown as an asset in books.
Annual turnover from jobwork is ₹8-9 lakhs (below GST threshold of ₹20 lakhs in most states).

GST Implications:

Liability to Register
- Since turnover is below threshold (₹20 lakhs), he is not liable to register for GST unless voluntarily registered or in a special category state.
Is the gold supplied to customer a 'supply' under GST?
- Since the gold returned to the customer is from his own stock (i.e., gold owned by the jobworker), this is a supply of goods by your client to the customer.
- This part (gold given to customers from his own stock) is a supply under GST.
Labour charges for jobwork
- Labour invoice for refining/melting is a supply of service (jobwork service) and is taxable under GST (if registered).
Composite nature
- The transaction is partly supply of goods (gold returned from his stock) and partly supply of service (jobwork).
- GST treatment differs for goods and service.
Stock of gold shown as asset
- Having gold stock as current asset is fine from accounting point but whenever it is supplied to customer (even if equal quantity), it is a taxable supply if registered.
Daily collection & exchange
- Returning gold from his own stock immediately is basically a sale of goods (not jobwork), so GST will apply on the value of that gold.
If below threshold & not registered
- No GST on labour invoice or gold supply.
- But he cannot claim ITC or collect GST.

Summary / Suggestion:

If turnover < ₹20L and not registered, no GST applicable.
If registered or turnover exceeds threshold, GST on:
- Jobwork service (labour charges).
- Gold supplied from his stock to customers (treated as supply of goods).
The gold returned from his stock is not "jobwork" but a sale/supply of goods.
It is important to value the gold supplied (market value) and pay GST accordingly.
He should maintain clear records of raw gold received, gold supplied from stock, and jobwork charges.

If your client plans to cross the threshold or register voluntarily, proper GST invoicing with separation of goods and service components will be necessary.