The wedding of his daughter Meera was rapidly approaching and Baldev Shah, a retired schoolteacher from Surat, was overjoyed. Since he wanted to give her a diamond necklace, he went to a famous jewellery store.

At ₹5,00,000, he discovered the ideal item: a diamond necklace. "Sir, the GST on diamond jewellery is 3%," the salesperson told him as he was ready to make the transaction.

Baldev was taken aback. "GST? On a wedding gift?"

"Yes, sir," the salesman explained. "The GST rate on diamond jewellery is 3%, which includes the cost of the diamonds, the metal, and making charges. Additionally, job work charges attract a 1.5% GST."

Baldev nodded his head, understanding the total cost would be ₹5,15,000.

Later, as he presented the necklace to Meera, he smiled, "Turns out, even diamonds come with a tax!"

Moral: Always be informed about taxes, even when buying gifts.

GST on Diamond– A Short Introduction

The Goods and Services Tax (GST) on diamonds in India varies based on the type of diamond and its processing stage. As of July 18, 2022, the GST Council revised the rates to address issues related to Input Tax Credit (ITC) accumulation in the diamond industry.

GST Rates on Diamonds:

Rough or Unpolished Diamonds: These attract a GST rate of 0.25%.
Cut and Polished Diamonds: The GST rate for these diamonds was increased from 0.25% to 1.5% to resolve ITC accumulation issues.
Diamond Jewellery: Finished diamond jewellery is taxed at 3% GST, which includes the cost of the diamond, the metal, and making charges.

Impact on the Industry:

The increase in GST on cut and polished diamonds aims to streamline the tax structure and reduce the ITC accumulation faced by the sector. This adjustment is expected to release blocked working capital and stimulate industry growth.

For consumers, the GST paid on diamond jewellery is non-refundable, as there are no provisions to claim GST benefits for personal purchases. However, registered businesses can utilise the input tax credit (ITC) on eligible purchases, helping to offset the GST paid during production or procurement.

GST on Diamond – Create a Table Mentioning Different Categories of Diamond with Price and Applicable GST Rate

Category	HSN Code	GST Rate	Description
Rough or Unworked Diamonds	7101	0.25%	Includes uncut, unpolished diamonds; primarily used in industrial applications.
Cut and Polished Diamonds	7102	1.5%	Diamonds that have been cut and polished but are not yet set in jewellery.
Diamond Jewellery	7113	3%	Finished jewellery items containing diamonds, such as rings, necklaces, and bracelets.
Making Charges on Diamond Jewellery	N/A	3%	Charges for the craftsmanship involved in creating diamond jewellery; included in the total value of the jewellery.
Grading, Certification & Bank Charges	N/A	18%	Charges for processing or manufacturing services provided by third parties in the diamond industry.
Job Work Charges	N/A	1.5%	Charges for processing or manufacturing services provided by third parties in the diamond industry.

Note: The GST rates mentioned above are applicable as per the latest notifications and may be subject to changes by the GST Council.

HSN Codes for GST on Diamond – Create a Table Mentioning Diamond Types with Their Respective HSN Codes

HSN Code	Description	GST Rate
7102	Diamonds, whether or not worked, but not mounted or set	0.25%
71021000	Unsorted diamonds, whether or not worked, but not mounted or set	0.25%
71022110	Industrial diamonds, unworked or simply sawn, cleaved or bruted, sorted	0.25%
71022120	Industrial diamonds, unworked or simply sawn, cleaved or bruted, unsorted	0.25%
71022910	Industrial diamonds, other than unworked or simply sawn, cleaved or bruted	0.25%
71022990	Other diamonds, whether or not worked, but not mounted or set	0.25%
71023100	Non-industrial diamonds, unworked or simply sawn, cleaved or bruted	0.25%
71023910	Non-industrial diamonds, cut or otherwise worked but not mounted or set	0.25%
71023990	Other non-industrial diamonds, whether or not worked, but not mounted or set	0.25%
71049100	Synthetic or reconstructed diamonds, whether or not worked or graded, but not strung, mounted or set	0.25%
71051000	Dust and powder of natural or synthetic diamonds	3%
71059000	Dust and powder of other natural or synthetic precious or semi-precious stones	3%

Impact of GST on Diamond Industry with Examples

Aspect	Description	GST Rate / Effect	Example
Simplified Tax Structure	Unified tax system replacing multiple state & central taxes	Positive	A trader sells goods worth ₹1,00,000. Under GST, 18% = ₹18,000. Single return filed. Previously, separate taxes totalled 24%.
Input Tax Credit (ITC)	Tax paid on inputs (tools, services) can be claimed back	Positive	A manufacturer buys machinery (₹90,000 GST) and raw material (₹36,000 GST), then sells goods with ₹1,80,000 GST. Pays only on the value added.
Export Promotion	GST is exempt on exports with refund provisions	0% (exports are zero-rated)	A diamond exporter buys raw material worth ₹3,00,000 + 18% GST (₹54,000), exports finished product for ₹5,00,000 with 0% GST. Gets a full refund of ₹54,000.
Job Work (Processing)	GST applies to outsourced cutting and polishing services	1.5% or 18% (depends on context)	1.5% for job work; 18% if reworking old jewellery
Jewellery Making Charges	Making charges attract GST if included in the total invoice	3%	₹3,000 GST on ₹1,00,000 jewellery incl. ₹10,000 making charge.
Exchange of Old Jewellery	GST is charged on the entire value of the new item, even if old jewellery is exchanged	3% on the new value	Exchanging ₹1L old for ₹2L new, GST on ₹2L applicable
Compliance Requirements	Small businesses face difficulty with online filing, returns, and e-invoicing	Neutral to Negative	SMEs lacking digital tools struggle with monthly filings
Unorganised Sector Issues	Many informal diamond units find it hard to register and comply	Negative	Digital GST filings are challenging for traditional artisans
Cash Flow Challenges	Businesses pay GST upfront and wait for refunds, affecting liquidity	Negative	SMEs face a working capital crunch while waiting for input credit refunds.
Transportation Cost Savings	Removal of interstate taxes like Octroi or Entry Tax	Positive	Seamless diamond transport from Surat to Mumbai

Notes:

Source References: GST Council Notifications, IndiaFilings, EbizFiling, GJEPC, Economic Times.
Export Refunds: Only available upon filing correct GST returns.
Rates as of 2025: Subject to change based on GST Council decisions.

Conclusion of GST on Diamond

GST on diamonds helps exporters by making exports tax-free (0% GST) and allowing them to claim back input tax. For example, if a diamond trader pays ₹54,000 as GST on raw materials, they can get a full refund. This reduces costs and keeps Indian diamonds competitive in global markets.

FAQs Related to GST on Diamond

Q: What is the GST rate on rough or uncut diamonds?

Rough diamonds attract a concessional GST rate of 0.25%.

Q: Is GST applicable to diamond jewellery?

Yes, finished diamond jewellery is taxed at 3% GST.

Q: Can exporters of diamonds claim GST refunds?

Yes, diamond exporters can claim refunds of input tax credits.

Q: What is the GST on diamond cutting and polishing services?

Job work services for diamonds are taxed at 1.5% GST.