Hallmarking and GST: Tax Implications for Jewellers

The Goods and Services Tax (GST) framework applies to every stage of the jewellery supply chain, including hallmarking. For jewellers, understanding how GST interacts with hallmarking charges is essential for accurate invoicing, proper input tax credit claims, and regulatory compliance.

GST Rate on Gold and Jewellery

Gold bullion and gold jewellery attract GST at 3% on the value of gold. Making charges on jewellery attract a separate GST rate of 5%. These rates have been in effect since the GST rollout on 1 July 2017.

GST on Hallmarking Charges

Hallmarking is a service provided by the hallmarking centre to the jeweller. As a service, hallmarking charges attract GST at the standard rate of 18%. This applies to the testing fee, marking charges, and any other service fees charged by the hallmarking centre.

The hallmarking centre issues a tax invoice to the jeweller showing the base service charges and the applicable GST separately.

Input Tax Credit (ITC) on Hallmarking

Jewellers registered under GST can claim Input Tax Credit (ITC) on the GST paid on hallmarking charges. This means the 18% GST paid to the hallmarking centre can be offset against the jeweller's output GST liability on jewellery sales.

To claim ITC, the jeweller must ensure that the hallmarking centre's invoice contains a valid GSTIN, the invoice is properly reflected in the jeweller's GST returns, the hallmarking centre has filed its own GST returns and reported the supply, and the payment is made within the prescribed timeframe.

How to Record Hallmarking Charges

In the jeweller's accounts, hallmarking charges should be recorded as a service expense, the GST component should be recorded separately as input tax, and the cost may be passed through to the consumer as part of the overall making charges or absorbed by the jeweller.

Impact on Consumer Pricing

Most jewellers include hallmarking costs within their overall making charges rather than showing them as a separate line item on the consumer invoice. The consumer invoice typically shows the gold value (weight multiplied by per-gram rate), making charges (which may include hallmarking costs), GST at 3% on the gold value, and GST at 5% on making charges.

BIS-Prescribed Hallmarking Fees

BIS prescribes maximum hallmarking charges that centres can levy. As of the latest schedule, the maximum charge per gold article is approximately Rs. 35 (exclusive of GST). Silver hallmarking charges are also prescribed under a separate schedule. These rates are set by BIS through official notifications.

GST Invoicing Requirements for Jewellers

When selling hallmarked jewellery, a GST-compliant invoice must include the jeweller's GSTIN and BIS registration number, a description of the article including purity (karat/fineness), the HUID number, the net weight and gross weight, the gold rate applied, making charges (separate line item), CGST and SGST or IGST as applicable, and the total value.

E-Invoicing and HSN Codes

Jewellery falls under HSN Code 7113 (articles of jewellery and parts thereof, of precious metal). Jewellers with turnover above the prescribed threshold must generate e-invoices through the GST portal, which adds another layer of compliance documentation.

Common Mistakes to Avoid

Not claiming ITC on hallmarking — Some jewellers overlook the input tax credit available on hallmarking charges, effectively overpaying their GST liability.

Misclassifying hallmarking as goods — Hallmarking is a service, not goods. Applying the wrong GST rate (3% instead of 18%) creates compliance issues.

Inconsistent HUID documentation — The HUID number should be traceable from the hallmarking invoice through to the sales invoice. Gaps in documentation can create audit complications.

Practical Takeaway

Hallmarking adds a modest cost to the jewellery supply chain — approximately Rs. 35 plus 18% GST per article. The ITC mechanism ensures that this cost does not cascade, and the overall impact on consumer pricing is minimal. Proper GST treatment of hallmarking charges is a straightforward matter of correct invoicing, timely ITC claims, and consistent documentation.