GST rate for Diamond and diamond manufacturers doubt

Under the current GST framework in India, the tax treatment of diamonds and diamond-related activities depends on the specific stage of processing and the nature of the transaction.

GST Rates for Diamonds

Key Considerations

• Diamond Jewellery (Composite Supply): When you purchase diamond jewellery, the supply is considered a "composite supply" where the jewellery itself is the principal supply. The total invoice value—which includes the cost of the diamonds, the precious metal, and the making charges—is taxed at 3%.

• Making Charges: If making charges are billed as part of the jewellery invoice, they attract the same 3% rate as the jewellery. If they are billed separately as a pure service (job work) for a registered entity, they are generally taxed at 1.5%.

• Job Work: For businesses or individuals providing services like cutting and polishing diamonds for a principal, the activity is classified as a job work service (SAC 9988) and attracts a 1.5% GST rate.

• Input Tax Credit (ITC): Registered businesses involved in the diamond trade or manufacturing can claim Input Tax Credit on the GST paid for raw materials (rough diamonds) and related business services, helping to reduce the overall tax burden and improve cash flow.

• Exports: Exports of diamonds are generally zero-rated, allowing for the refund of taxes paid on inputs, which supports India's position in the international market.

Summary: The GST rate is 0.25% for rough diamonds, 1.5% for loose cut and polished diamonds or professional job work services, and 3% for finished diamond jewellery (including making charges when billed together).