GST Handbook for Jewelers

GST HANDBOOK FOR

JEWELLERY

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VENU AND VINAY
Chartered Accountants
 GST Handbook for Jewelers

INDEX
Registration ................................................................................................................................................... 3
General Provisions .................................................................................................................................... 3
Taxes ............................................................................................................................................................. 3
Rates of taxes applicable on different jewelry along with HSN/SAC ........................................................ 3
Type of Tax to Charge ............................................................................................................................... 3
Taxability of Different Transactions .......................................................................................................... 4
Job work procedure....................................................................................................................................... 6
Transition Provisions ..................................................................................................................................... 7
File TRAN -1 within 90 days, filling the following details: ......................................................................... 7
File TRAN -2 every month for first six months: ......................................................................................... 7
Accounts ........................................................................................................................................................ 7
Journal Entries in Books of accounting ..................................................................................................... 7
Returns ........................................................................................................................................................ 11
Return for the Month of July, August & September due dates .............................................................. 11

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 GST Handbook for Jewelers

Registration
General Provisions
1. Liable to register only if aggregate turnover of a person is >20 Lakhs in a financial year (>10 lakhs
in certain states like Assam, Manipur, Meghalaya etc.…)
2. This threshold doesn’t apply to interstate supply i.e. in case supply is made to different states, even
for Rs 1 of sales, registration has to be taken.
3. Existing jewelers need to migrate to GST
4. Registration should be taken in each state of operation
5. In case of branches within the state, no need of taking separate registration
6. In case of branches in different state, separate registration should be taken
state wise
7. In registration, branches should be shown as additional place of business
8. Premises of job worker should be shown as additional place of business if job worker is
unregistered.

Taxes
Rates of taxes applicable on different jewelry along with HSN/SAC
Sl no Particulars HSN/SAC Code GST Rate
1 Rough and un-worked diamonds, precious 7102, 7103, 7104 0.25%
and semi-precious stones
2 Pearls, Gold, Silver, Articles of jewelry of 7106, 7108, 3%
gold, silver, etc. 7113, 7118
3 Job work in relation to cut and polished 9988 5%
Diamonds, plain or studded
jewelry of gold, silver, etc.
4 Other professional, technical and business 9983 18%
services (residuary clause)

Type of Tax to Charge

Sl no Address of Customer Tax
1 Within the Same state C+S
2 Another State / foreigner IGST

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 GST Handbook for Jewelers

Taxability of Different Transactions

For the sake of simplicity and clarity, all the possible transactions between a Jeweler and a customer and
their tax implications under the GST regime are listed below.

1. Consolidated BILL: Customers walks into a Jeweler showroom and buys a Gold ornament worth Rs.
1,00,000.
a) The Jeweler will charge GST @ 3% on Rs. 1,00,000.
b) The charge would include
o Making Charges
o Wastage
c) Hence, it’s a composite supply as defined under section 2(30) comprising of supply of Gold
ornament along with supply of ornament making services.
d) Gold ornament being the principal supply, the entire value of taxable supply shall be charged
@3% as per section 8 of the CGST Act.

2. ITEMISED BILL: Customers walks in to a Jeweler showroom and buys a Gold ornament worth Rs.
1,00,000 and the Jeweler charges separately for Gold and making charges.
(i) Making charges charge is an Independent Supply
(ii) Gold Ornament Value including wastage Loss collected separately is an Independent Activity.
In this case, since the consideration for both Gold and making charges have been disclosed separately
in the invoice by the Jeweler, the supplies will be taxable at their respective applicable rates, i.e. Gold
@ 3% and making charges @ 18%.
It is important to note that the making charges rate will not be same as JOB Work charges charged at 5%.
5% rate of Job work charges shall be applicable on the charges paid by the Jeweler to the GOLD SMITH (Job
worker).

3. INPUT TAX CREDIT: Does the Buyer of Gold gets Input Tax Credit.
a) ITC is seamless available for all the purchases used in furtherance of the business and not
specifically restricted under 17(5).
b) Gold is not listed item under 17(5) Blocked Credits.
c) Hence, if the buyer is a reseller or uses the Jewelry in their Business, they get ITC.

4. Purchase of OLD JEWELLERY FROM Customer and pay cash.

This is a transaction of inward Supply without payment of taxes. To check the applicability, we need
to refer 9(4).
9(4): The central tax in respect of the supply of taxable goods or services or both by a supplier, who
is not registered, to a registered person shall be paid by such person on reverse charge basis as the
recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable
for paying the tax in relation to the supply of such goods or services or both.

Since Customers are not suppliers so no Tax is payable by Jeweler under 9(4).

Additional Cue: Notification No.10/2017: Local purchase of second hand goods by a registered
dealer (Jeweler in this case) is exempt from tax provided the dealer pays tax at the time of resale
on the value determined as per Valuation rules.

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 GST Handbook for Jewelers

As regards the tax on the sale of new jewelry in return for the old jewelry, same principles as
discussed in cases 1 and 2 would apply.

5. Customer gives old jewelry and in return buys a Gold ornament worth Rs. 1,00,000/- old gold is
valued at Rs.80,000/-
Refer 9(4) + 32(5)
As discussed above the old jewelry taken from the Customer does not constitute supply under GST
law.
Now if the same article is repaired and re-sold with / without addition of additional Gold, then the
Tax shall be charged only on the increment Value. i.e. Rs. 20,000/-

But if the supply is for a different ornament or there is major processing of the old item, then the
Tax shall be levied on full value of the new gold ornament i.e. 1,00,000/-.

32(5): Where a taxable supply is provided by a person dealing in buying and selling of second hand
goods i.e., used goods as such or after such minor processing which does not change the nature of
the goods and where no input tax credit has been availed on the purchase of such goods, the value
of supply shall be the difference between the selling price and the purchase price and where the
value of such supply is negative, it shall be ignored:

So, the following are conditions,

a. used goods are sold as such or after minor processing which does not change the
nature of the goods
b. no input tax credit has been availed on the purchase of such goods

6. Customer owns 20 gm gold and gets a gold bangle made from the Jeweler. The Jeweler charges Rs.
5,000 as making charges from the customer.

1. The supply of gold by the customer to the Jeweler for making bangles will not fall under the
definition Supply, no Tax.
2. Jeweler is doing “Job work” under the GST Act since the customer will be an individual who is not
a registered person under the GST Act.
3. As per section 2(68) of the CGST Act, job work means any treatment or process undertaken by a
person on goods belonging to another registered person and the expression “job work” shall be
construed accordingly.
4. Therefore, the concessional rate of 5% of Job work in relation to gold shall not apply in the instant
case and the Jeweler shall charge GST @ 18% on the making charges.

7. General Advise

1. In case of the OLD Gold Purchase, it is recommended to pay GST on RCM and take full credit, avoid
future litigation.
2. Gold exchanged for new gold, liability s on the net transaction, since ITC is being paid and taken on
the old gold, recommended to charge tax on full Transaction value.

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 GST Handbook for Jewelers

Job work procedure

(1) Move the Goods as per the provisions of Rule 55, DC Contents
(2) Follow the procedures laid down in Rule 45.
(3) Do Quarterly filing of Stock in ITC-04
(4) If Job worker not registered
a. Add it as Additional Place of Business
b. Discharge the GST on RCM on the fees paid to Job worker
(5) ITC is fully available whether paid by the job worker or Jeweler under RCM.

RULE 45. Conditions and restrictions in respect of inputs and capital goods sent to the job
worker. -
(1) Delivery Challan: The inputs, semi-finished goods or capital goods shall be sent to the job
worker under the cover of a challan issued by the principal, including where such goods
are sent directly to a job-worker.

(2) The challan issued by the principal to the job worker shall contain the details specified in
rule 55 {Contents of Delivery Challan}.

(3) Quarterly Filing: The details of challans in respect of goods dispatched to a job worker or
received from a job worker or sent from one job worker to another during a quarter shall
be included in FORM GST ITC-04 furnished for that period on or before the twenty-fifth
day of the month succeeding the said quarter.

(4) Deemed Supply: Where the inputs or capital goods are not returned to the principal within
the time stipulated in section 143, it shall be deemed that such inputs or capital goods had
been supplied by the principal to the job worker on the day when the said inputs or capital
goods were sent out and the said supply shall be declared in FORM GSTR-1 and the
principal shall be liable to pay the tax along with applicable interest.

Rule 55. Transportation of goods without issue of invoice. -

(i) date and number of the delivery challan;
(ii) Consignor Details: name, address and Goods and Services Tax Identification Number
of the consigner, if registered;
(iii) Consignee Details: name, address and Goods and Services Tax Identification Number
or Unique Identity Number of the consignee, if registered;
(iv) HSN Harmonised System of Nomenclature code and description of goods;
(v) quantity (provisional, where the exact quantity being supplied is not known);
(vi) taxable value; tax rate and tax amount – central tax, State tax, integrated tax, Union
territory tax or cess, where the transportation is for supply to the consignee;
(vii) place of supply, in case of inter-State movement; and
(viii) signature.

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 GST Handbook for Jewelers

Transition Provisions
File TRAN -1 within 90 days, filling the following details:
1. Any unutilized ITC Credits to be carried forward from VAT Returns or excise returns
2. Any unutilized ITC on Capital goods eligible and not reported yet in the existing VAT returns.
3. List of Traded goods where deemed credit of CENVAT i.e. 20% of GST is available

File TRAN -2 every month for first six months:

1. List out the opening stock traded goods sold MOM
2. File Tran2 detailing movement of Traded stock carried forward from earlier regime.

Accounts
Journal Entries in Books of accounting

Transaction Under GST

Outward Supply-Sales

Local Sale – B2B Dr Debtors A/c 1,41,600

Cr B2B Sales A/c 1,20,000
Cr Output CGST A/c 10,800
Cr Output SGST A/c 10,800
Local Sale – B2C Dr Debtors A/c 1,41,600
Cr B2C Sales A/c 1,20,000
Cr Output CGST A/c 10,800
Cr Output SGST A/c 10,800
Interstate Sale Dr Debtors A/c 1,18,000
Cr Sales A/c 1,00,000
Cr Output IGST A/c 18,000
Export Dr Debtors A/c 1,25,000
Cr Sales (export) A/c 1,25,000
{Assuming Goods moved again Bond}
Advance receipt (a) Dr Cash/Bank A/c 10,000
Dr IGST Advance A/c 1,800
Cr Customer A/c 10,000
Cr Output IGST A/c 1,800
Dr Output IGST A/c 1,800
Cr Cash/Bank A/c 1,800
Raising of Invoice Dr Customer A/c 1,18,000
(b) in subsequent Cr Sales A/c 1,00,000
month Cr Output IGST A/c 18,000

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 GST Handbook for Jewelers

Transaction Under GST

Dr Output IGST A/c 18,000
Cr IGST Advance A/c 1,800
Cr Cash/Bank A/c 16,200

Dr Cash/Bank A/c 90,000

Cr Customer A/c 90,000

Inward Supply-Purchases from

Registered Dealer - Dr Purchase A/c 1,00,000
Intra state Dr Input CGST A/c 9,000
Dr Input SGST A/c 9,000
Cr ABC 1,18,000

Registered Dealer Dr Purchase A/c 15,000

(Inter State) Dr Input IGST A/c 2,700
Cr Creditor 17,700

Under Reverse Dr Import Purchase A/c 10,000

Charge Mechanism Dr Input IGST A/c 1,800
Cr Creditors A/c 10,000
Cr Output IGST A/c (Liability) 1,800

Purchase from Dr Purchase A/c 1,00,000

Unregistered Dr Input IGST A/c 18,000
Dealer - RCM Cr Creditors A/c 1,00,000
Cr Output IGST A/c(Liability) 18,000

Composition Dr Purchase 50,000

Dealer Cr Creditors 50,000

Expenses & Purchase of Capital Goods

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 GST Handbook for Jewelers

Transaction Under GST

Indirect Expenses Dr Telephone Charges A/c 5000
Dr Input CGST A/c 450
Dr Input SGST A/c 450
Cr Bank 5,900

Asset Purchase Dr Furniture A/c 40000

(Interstate) Dr Input IGST A/c 4,800
Cr ABC furniture’s A/c 44,800

Up on GSTR -1
Transfer to Liability Dr Output CGST A/c 21,600
Ledger Dr Output SGST A/c 21,600
Dr Output IGST A/c 19,800
Cr Liability Ledger CGST A/c 21,600
Cr Liability Ledger SGST A/c 21,600
Cr Liability Ledger IGST A/c 19,800

Up on GSTR -2
Transfer to Credit Dr ITC CGST Ledger A/c 9,450
Ledger Dr ITC SGST Ledger A/c 9,450
Dr ITC IGST Ledger A/c 11,100
Cr Input CGST A/c 9,450
Cr Input SGST A/c 9,450
Cr Input IGST A/c 11,100

On Payment of Taxes
Transfer to Cash Cash Payment
Ledger Dr Electronic Cash Ledger {I+C+S} 33,000
Cr Bank 33,000
TDS / TCS
Dr Electronic Cash Ledger
Cr Govt / eCom Operator

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 GST Handbook for Jewelers

Transaction Under GST

Up on GSTR -3
Transfer to Credit Dr Liability Ledger CGST A/c 21,600
Ledger Dr Liability Ledger SGST A/c 21,600
Dr Liability Ledger IGST A/c 19,800
Cr ITC CGST Ledger A/c 9,450
Cr ITC SGST Ledger A/c 9,450
Cr ITC IGST Ledger A/c 11,100
Cr Electronic Cash Ledger 33,000
{I + C + S}

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 GST Handbook for Jewelers

Returns
Return for the Month of July, August & September due dates
Q1. When can I start uploading sales/outward Invoice?

15th July onwards

Q2. Filing of Returns for the month July & August

Month GSTR 3B Simplified returns (Pay

tax)
July 20th August
August 20th September

AND

Month GSTR 1 GSTR 2 GSRT 3

July -17 1st- 5th September 6th – 10th September
August – 17 16th- 20th September 21th – 25th September

Sept - 17 10th October 15th October 20th October

*** END OF NOTE ***

Any clarification please write to me on venu@vnv.ca

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