GST on diamonds

The Goods and Services Tax (GST) has changed how diamonds are taxed in India. Diamonds are one of India's top exports, and GST diamond rules are important for businesses to follow if they want to avoid penalties and save money. The diamond GST rate depends on the type and stage of the diamond—whether it’s rough, polished, or set in jewellery. This means different people in the diamond industry—like miners, polishers, exporters, and jewellers—all deal with different tax rates.

India is a big player in the diamond world, cutting and polishing about 90% of the world’s rough diamonds. So, diamond businesses here need to understand how GST works. While GST makes the system more organised and fair, it also brings some challenges. From raw stones to shiny rings, knowing the GST for diamond rules helps businesses price their products better, manage their money smartly, and stay ahead in the global market.

GST Rates on Diamonds

The GST rates on diamond vary depending on the type and processing stage of the diamond. The GST Council has defined specific tax rates for different diamond categories and associated services.

Rough or unworked diamonds attract a concessional GST rate to ease the tax burden during the early stages of the value chain. In contrast, polished diamonds not set in jewellery are taxed at 1.5%.

Diamond jewellery, where diamonds are mounted in precious metals, is taxed at a uniform 3% GST rate on the entire value, including making charges. This simplifies taxation compared to the earlier regime that taxed materials and services separately.

Related services attract varying GST rates. Job work charges in the gems and jewellery sector are taxed at 1.5%, supporting outsourced processing. Meanwhile, services like grading, certification, or bank fees generally attract the standard GST rate of 18%.

With GST 2.0, job work service charges are still 1.5%. What changed? Auto-population of these rates happens with e-invoices, lessening the probability of human errors. For exporters of jewellery, GSTR-1 and GSTR-3B get reconciled automatically—no more tedious cross-verifying.

GST on Imports and Exports of Diamonds

Exporters no longer have to file refund applications manually. Under GST 2.0, refunds can be claimed directly via the dashboard with automatic shipping bill imports.

GST on Rough Diamonds

Rough diamonds, the raw base of the diamond industry, are taxed at a concessional GST rate of 0.25%. This low rate reflects the sector’s economic and export importance to India. It applies uniformly to all domestic transactions and imports (excluding applicable customs duties), offering consistency and reduced tax burden during procurement.

This diamond GST rate benefits processors and traders by minimising working capital outflow and supporting India’s status as a global diamond-cutting hub. For bulk transactions, the lower tax significantly improves cost efficiency, especially during the initial stages of the supply chain.

If you're importing loose diamonds, return filings and ITC claims reflect immediately in the Input Tax Ledger on the GST portal 2.0. No extra effort.

GST on Polished Diamonds

Polished diamonds, reflecting significant value addition, attract a revised diamond GST rate of 1.5% (effective July 18, 2022), up from the earlier 0.25%. This increase was introduced to address ITC accumulation in the sector. The new diamond GST rate applies to all wholesale and retail transactions involving polished diamonds not mounted or set in jewellery.

This rate shift acknowledges the added value during polishing and aims to enhance tax collection. For manufacturers, GST paid on polished diamonds is eligible for ITC, helping offset liability on finished jewellery. However, traders may experience margin pressure unless costs are factored into pricing. The higher tax also impacts working capital due to increased upfront outflows.

The 1.5% rate continues in GST 2.0, but now the system reconciles ITC from suppliers automatically, so you don't have to find it yourself.

Compliance and Documentation

• GST registration: Mandatory for diamond businesses exceeding the turnover threshold to legally operate and claim ITC.
• Invoicing: All purchases and sales must be supported by GST-compliant invoices showing the correct GST rates and amounts.
• Return filing: Regular filing of GSTR-1 (outward supplies) and GSTR-3B (summary returns) is essential to maintain compliance.
• Record maintenance: Detailed records of sales, purchases, and ITC claims must be kept for audits and tax filings.
• E-way bills: Required for transporting diamonds and gold jewellery (HSN code 71) post-47th GST Council meeting, ensuring traceability of high-value goods.
• E-invoicing: Compulsory for businesses with an annual turnover of over ₹10 crores, including those in the diamond sector.
• Import/export compliance: Importers and exporters must maintain customs documents, shipping bills, and GST refund records.
• Tax management: Proper compliance helps avoid penalties, optimise tax liability, and improve cash flow and working capital management.

Starting August 2025, after the implementation of GST 2.0, the e-invoicing threshold will be reduced to ₹5 crores, covering more companies under its ambit.

Also Read: Changes in GST Rates: How Does It Impact You

Input Tax Credit (ITC) in diamond industry

Input Tax Credit is a vital GST mechanism enabling businesses to offset taxes paid on inputs against their output tax liability. In the diamond industry, optimising ITC significantly enhances profitability and cash flow. GST on diamond purchases—including rough and polished diamonds, job work, and business services—can be claimed as ITC when used for manufacturing jewellery.

The increase in the diamond GST rate from 0.25% to 1.5% for polished diamonds was introduced to reduce ITC accumulation, balancing input-output tax liability. For jewellery manufacturers, ITC on inputs like diamonds, metals, and services can be offset against the 3% GST on final jewellery sales, preventing tax cascading.

Businesses can also claim ITC on services from unregistered job workers via reverse charge. Accurate documentation, timely GST return filings, and supplier compliance are essential for claiming ITC. However, ITC is restricted on personal use and exempt goods. Exporters benefit through ITC refunds, supporting India’s export-driven GST for the diamond sector.

GST 2.0 also automatically updates ITC statements from your e-invoice data, eliminating manual reconciliation. If your credits are blocked under Rule 43, the portal indicates so automatically.

GST rate and HSN code for diamonds

The Harmonized System of Nomenclature (HSN) codes are essential for accurate classification and GST compliance in the diamond industry. Diamonds fall under Chapter 71, which includes precious stones, metals, and jewellery.

Using the correct HSN code for GST for diamonds is critical for proper tax application, documentation, and Input Tax Credit (ITC) claims. Misclassification can result in penalties and ITC issues.

Impact of GST on diamond jewellery

The implementation of GST has significantly impacted the diamond jewellery sector, influencing pricing, consumer behaviour, and business operations. Diamond jewellery attracts a uniform 3% GST on the total invoice value, covering diamonds, metals like gold/platinum, and making charges. This simplified structure replaced the earlier fragmented tax regime, streamlining compliance but also affecting pricing strategies.

Since making charges are now taxable, overall costs have risen for consumers, especially on high-value purchases, impacting demand and perception. For consumers, GST on diamond jewellery is non-refundable, unlike for businesses.

For jewellers, the diamond GST rate structure, including the 1.5% GST on polished diamonds, necessitates strategic inventory and procurement planning to balance profitability and compliance.

Input Tax Credits became crucial for registered businesses to optimise tax liabilities. The GST system has pushed the industry toward greater transparency, benefiting organised players while posing challenges for unorganised jewellers adapting to formal compliance.

Advance rulings related to GST on diamonds

Advance rulings provide clarity on GST applications, helping diamond businesses make informed decisions and avoid disputes. A key example is Karnataka AAR No. KAR ADRG 35/2021, where M/s Aadhya Gold Pvt. Ltd., dealing in second-hand jewellery, was ruled liable to pay GST only on the margin between purchase and sale price under Rule 32(5) since no Input Tax Credit was claimed.

Another important ruling is KAR ADRG 16/2018, involving M/s Rajarathnam's Jewels, which clarified that depositing diamonds into a vault for EVR issuance does not constitute a supply, and hence, is not taxable under GST.

These rulings guide businesses in complying with GST on diamond jewellery and understanding complex scenarios related to diamond GST rate and storage practices. They serve as valuable references, helping the diamond industry align with GST provisions and reduce litigation risks through well-informed operational strategies.

How to calculate GST on diamond jewellery?

• 1. Identify sale value: Determine the total invoice value of the diamond jewellery, including the cost of diamonds, gold, and making charges.
• 2. Applicable GST rate: Diamond jewellery attracts a GST rate of 3% on the total invoice value, which includes materials and making charges combined.
• 3. Calculate GST amount: Multiply the total value (materials + making) by 3%. For example, ₹1,00,000 × 3% = ₹3,000 as GST payable.
• 4. Add GST to the base price: Add the GST amount to the base price to get the final billing amount the customer needs to pay.
• 5. Issue GST-compliant invoice: Ensure the invoice clearly mentions the GST amount, GSTIN, HSN code (typically 7113 for jewellery), and breakdown of value components.

When calculating GST on diamond jewellery imports, additional factors come into play, including customs duties and integrated GST (IGST). The IGST is calculated on the value that includes the customs duty, making the effective tax rate higher for imported jewellery compared to domestically produced items. For example:

ABC Jewellers
GSTIN: 27ABCDE1234F1Z5
Address: 123 Gold Street, Mumbai, Maharashtra - 400001
Contact: +91-9876543210 | Email: contact@abcjewellers.com

Invoice No.: INV/2025/0045
Date: 04-Apr-2025
Buyer Name: Mr. Rohan Sharma
Buyer GSTIN (if applicable): —
Shipping Address: 56 Silver Lane, Delhi - 110001

Tax Summary:

Total Invoice Value (incl. GST): ₹1,03,000

Payment Mode: UPI

Declaration: This is a computer-generated invoice and does not require a physical signature.

E-way bills for diamonds

E-way bills are now a vital part of the GST compliance framework, especially for transporting high-value goods like diamonds. After the 47th GST Council meeting, e-way bills became mandatory for the movement of precious stones, including diamonds and gold jewellery under HSN code 71. This adds another compliance layer for businesses involved in diamond logistics.

The e-way bill system for GST on diamond movements ensures proper tracking and tax compliance. For interstate transport of diamonds valued above ₹50,000, generating an e-way bill is mandatory. These bills include crucial details like HSN code, value, applicable diamond GST rate, and information about the consignor, consignee, and transporter.

Due to the high value and small size of diamonds, businesses often implement additional security measures. Any mismatch between goods and e-way bill details can result in penalties or detention. Exporters must follow specific provisions for transport to ports.

E-way bill generation is now directly tied to e-invoicing, which does away with the double entry of details.

Conclusion

The GST framework for diamonds is structured with 0.25% on rough diamonds, 1.5% diamond GST rate on polished diamonds, and 3% on diamond jewellery. The revised GST on diamond aims to reduce ITC issues and improve cash flow. For businesses, understanding GST for diamond is vital for compliance, ITC utilisation, and profitability.

Zero-rated exports and updated regulations support India’s diamond industry and global competitiveness. Staying informed on GST changes, advance rulings, and sector-specific policies ensures smooth operations, strategic financial planning, and long-term growth in this high-value, globally significant market.

In line with GST 2.0, all these enhancements—auto-populated returns, auto-matching of ITC, and faster refunds—render compliance a lot simpler for diamond exporters. The procedure is less cumbersome, quicker, and much less labour-intensive.

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Frequently Asked Questions

Are all types of diamonds subject to the new GST rate?

No, GST rates differ. Rough diamonds remain at 0.25%. Cut and polished (not set in jewellery) attract 1.5%, while diamond jewellery is taxed at 3% including making charges. Industrial diamonds vary based on classification and use. The GST on diamond framework thus varies based on the type and processing stage of the diamonds.

Why is GST 1.5% on diamonds?

GST on polished diamonds rose to 1.5% in July 2022 to reduce Input Tax Credit accumulation. Earlier, inputs had higher GST (5–18%) while output was taxed at 0.25%, creating an imbalance. The increased GST for diamond helps align tax credits, improve cash flow, and support industry growth by enabling better credit utilisation.

What is the GST number of Diamond India Limited?

Diamond India Limited’s GST number is a unique 15-digit code, specific to its registration. It includes state and PAN details. For accurate and current information about a specific company's GST registration number, it's advisable to check their official website, contact their finance department directly, or verify through the GST portal using their business name.

How does the GST rate increase affect the diamond jewellery industry?

The 1.5% hike on the GST on diamond raises polished diamond costs, affecting jewellery pricing and cash flow. Registered jewellers can offset this through Input Tax Credit, but unorganised players may struggle. It influences inventory and procurement strategies. The industry is adapting pricing and financial practices to maintain competitiveness under the new regime.

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Tax and GST regulations are subject to change. The information in this article is based on applicable laws, rules, notifications, and interpretations in force as on the date of publication and may change due to amendments, judicial decisions, or regulatory updates.