GST Rate on Diamond 2025: Find the HSN Code & GST Rate

As the diamond industry continues to grow and evolve, understanding the current Goods and Services Tax (GST) rates and the associated HSN (Harmonized System of Nomenclature) codes is essential for both businesses and consumers, with the government's aim to streamline the taxation system, diamonds—whether polished, uncut, or set in jewellery—are subject to specific tax rates. In this article, we break down the latest diamond GST rates in 2025, along with their relevant HSN codes, to help you navigate the complexities of the diamond trade. Whether you're a manufacturer, retailer, or buyer, understanding these tax regulations can help ensure compliance and facilitate smooth transactions within the industry.

Applicability of GST on Diamonds

The applicability of GST on diamonds depends on their type, usage, and stage of processing. Below are the key aspects:

• Loose Diamonds:
• Rough Diamonds: GST is charged at 0.25% for rough, unworked diamonds.
• Polished Diamonds: GST is also 0.25% for polished diamonds that are not mounted or set in jewellery.
• Diamond Jewellery:
• Diamonds set in jewellery (e.g., rings, necklaces) attract a 3% GST on the total value, including making charges and the cost of the diamonds and metal.
• Imports:
• GST is applicable on imported diamonds at 0.25% (or 3% for jewellery) and must be paid at the customs clearance stage.
• Exports:
• Exports of diamonds are zero-rated under GST, allowing businesses to claim refunds on input taxes paid.
• Industrial Diamonds:
• Industrial diamonds (used for tools and equipment) are subject to 0.25% GST.
• Job Work:
• GST on job work related to diamond processing is 1.5% for registered workers and 18% for labour work or repairs.

Also read:  What is GST on Gold? - GST Rate for Gold & Jewellery

GST on Rough Diamonds

Rough diamonds, a key commodity in the global diamond trade, are subject to a specialized tax framework under India's GST regime. Understanding the applicable GST rate, compliance requirements, and export benefits is crucial for businesses in this sector.

• GST Rate: Rough diamonds attract a GST rate of 0.25%.
• Applicability: The GST rate is applied at both the point of sale and the point of purchase of rough diamonds. This ensures uniform taxation across transactions involving rough diamonds, whether between manufacturers, traders, or other stakeholders.
• Compliance: Businesses dealing in rough diamonds must register for GST to comply with the tax regulations. They are required to adhere to GST filing requirements, including periodic returns and maintaining proper documentation for sales and purchases.
• Input Tax Credit (ITC): One of the key benefits for businesses in the diamond sector is the ability to claim Input Tax Credit (ITC). Companies can offset the GST paid on the purchase of rough diamonds against the GST collected on their sales, effectively reducing their tax liability.
• Export: Rough diamonds enjoy a zero-rated status under GST when exported. This means that the export of rough diamonds is not subject to any GST, enhancing India's competitive position in the international diamond trade market. The zero rating also allows exporters to claim refunds on any input taxes paid during the manufacturing process, boosting the sector's export potential.

Overall, the low GST rate and favourable export conditions for rough diamonds help maintain India's prominent role in the global diamond market, benefiting businesses engaged in diamond processing and trading.

GST on Polished Diamonds

Polished diamonds, an essential product in the jewellery and luxury goods market, are subject to specific tax provisions under GST. Here’s an overview of the GST applicable to polished diamonds:

• Polished Diamond GST Rate: Polished diamonds attract a GST rate of 3%.
• Applicability: This GST rate is applicable on the sale and purchase of polished diamonds, whether in wholesale or retail transactions, ensuring consistent taxation throughout the supply chain.
• Compliance: Sellers of polished diamonds must ensure proper invoicing and meet the GST filing requirements. Compliance with GST rules, including the timely filing of returns, is necessary to avoid penalties and maintain smooth operations.
• Export: Polished diamonds are zero-rated under GST when exported, making them eligible for refund claims on any input taxes paid, thereby promoting India's position as a major diamond export hub.
• Input Tax Credit (ITC): Businesses can claim Input Tax Credit (ITC) on the GST paid for inputs used in the polishing process, such as raw diamonds and manufacturing materials, reducing the effective tax burden.
• Inventory: It is critical for businesses to maintain detailed and accurate records of their diamond inventory, as compliance with GST regulations requires transparency and proper tracking of purchases and sales.

GST on Diamond Imports and Exports

Understanding the GST implications on diamond imports and exports is essential for ensuring compliance, optimising tax benefits, and maintaining seamless cross-border trade operations.

• Import GST: GST on imported diamonds must be paid at the customs clearance stage as per applicable rates.
• Export GST: Diamonds exported are zero-rated under GST, meaning no GST is payable on exports, and businesses can claim refunds on input taxes.
• Documentation: Accurate and complete documentation is essential for claiming GST refunds on exports and ensuring compliance with tax regulations.
• ITC: Importers can claim Input Tax Credit (ITC) on GST paid at the time of import, reducing the overall tax burden.
• Compliance: Adherence to import and export regulations, including GST provisions, is crucial to avoid penalties and streamline cross-border transactions.
• Business Loan: Importers and exporters can access business loans to manage cash flow needs, particularly for GST-related payments and refunds.

Proper understanding of place of supply rules and maintaining thorough documentation are vital for ensuring smooth operations and compliance in diamond import and export businesses.

Place of Supply

Under Section 10 of the IGST Act, 2017, the place of supply for gems and jewellery, including diamond jewellery, is determined by the location where the movement of the jewellery ends, i.e., where it is delivered to the recipient.

• Intra-state supply: If a business sells jewellery within the same state (i.e., local transactions), it is classified as an intra-state supply, and CGST and SGST are charged accordingly.
• Inter-state supply: For transactions where the diamonds or diamond jewellery move between different states, IGST is applicable.

As per GST Circular No. 27/2019, dated 28th June 2019, for services rendered on imported unpolished diamonds that are later exported, the place of supply is governed by Section 13(2) of the IGST Act, 2017. The diamonds must meet the condition that, after further processing (such as cutting and polishing), they are not used within India. In such cases, the place of supply will be the location of the final recipient (if their address is available). If no such address exists, the place of supply will be the location of the supplier.

Time of Supply

For gems and diamond jewellery, GST becomes payable at the earliest of the following two events:

• When the jeweller receives the final payment for the jewellery.
• When the jeweller supplies the jewellery to the recipient.

The GST liability arises as soon as one of these events occurs, whichever happens first.

E-way Bills

Following the 47th GST Council meeting, it has been mandated that e-way bills are now required for the transportation of precious stones (including diamonds and gold, classified under HSN 71) as well as gold jewellery. This change is aimed at enhancing the tracking and compliance mechanisms for the movement of high-value goods, ensuring greater transparency and control over their transportation.

E-invoicing for Diamonds

E-invoicing for diamonds is mandatory for businesses with an annual turnover exceeding ₹10 crore, as per GST regulations.

 ITC on Diamond Jewellery and Related Transactions

A jeweller can claim Input Tax Credit (ITC) on all purchases made for business purposes, including raw materials and services, except for those specifically disallowed under Section 17(5) of the CGST Act.

• Eligibility: Businesses in the diamond industry can claim Input Tax Credit (ITC) on GST paid for inputs such as raw materials, capital goods, and services used in the production process.
• Documentation: Proper and accurate documentation, including invoices and receipts, is crucial for claiming ITC.
• Conditions: ITC can only be claimed if the supplier has deposited the corresponding GST with the government.
• Reconciliation: Regular reconciliation of purchase and sales data is necessary to ensure accurate ITC claims and avoid discrepancies.
• Utilisation: The ITC claimed can be utilised for the payment of output GST liability, helping to reduce the overall tax burden on the business.

Advance Rulings Related to GST on Diamonds

Advance rulings related to GST on diamonds provide businesses with clarity on classification, tax rates, export procedures, and compliance, helping to streamline operations and minimize legal risks.

• GST Classification: Advance rulings play a crucial role in classifying different types of diamonds under the appropriate GST headings, ensuring correct tax application.
• Rate Clarification: Specific rulings provide clarity on the applicable GST rates for various forms of diamonds, such as rough, polished, and set diamonds, helping businesses stay compliant.
• Export Procedures: Advance rulings guide businesses in understanding the GST procedures for diamond exports, ensuring proper documentation and zero-rated tax application.
• ITC Eligibility: They clarify the eligibility and conditions for claiming Input Tax Credit (ITC) on purchases related to the diamond business, minimising the risk of errors.
• Compliance: Rulings assist businesses in comprehending their compliance obligations under GST, preventing legal disputes and minimising the risk of litigation.
• Business Strategy: Advance rulings provide valuable insights for businesses in strategic planning, including pricing decisions and aligning their operations with GST regulations.

GST Compliance and Documentation for Diamond Business

Compliance with GST regulations is crucial for businesses in the diamond industry to ensure smooth operations, avoid penalties, and maintain transparency in transactions. Proper documentation and adherence to filing requirements are key to staying compliant with tax laws.

• GST Registration: GST registration is mandatory for businesses whose turnover exceeds the prescribed threshold limit.
• Invoicing: Businesses must issue proper GST-compliant invoices for all transactions, including sales and purchases of diamonds and jewellery.
• Filing Returns: Regular filing of GST returns, such as GSTR-1 and GSTR-3B, is required to remain compliant with tax regulations.
• Record Keeping: Detailed records of all sales, purchases, and Input Tax Credit (ITC) claims must be maintained for auditing and tax filing purposes.
• Audits: Businesses may be subject to GST audits and inspections to verify compliance with the applicable tax laws.
• Training: It is essential to train employees on GST compliance and documentation requirements to ensure smooth and accurate operations within the business.

How to Calculate GST on Diamond Jewellery?

The calculation of GST on diamond jewellery can be complex due to the nuances surrounding composite and mixed supply. According to Section 8 of the CGST/SGST Act, these terms are defined as follows:

• Composite Supply: A supply consisting of at least two goods or services, where one is the principal supply, and the entire supply is treated as that of the principal supply.
• Mixed Supply: A combination of at least two goods or services, where each item attracts its own GST rate. The highest tax rate among the supplies will apply to the entire supply.

Let’s break down different scenarios to understand how GST applies to diamond jewellery.

Example 1: Composite Supply

Consider a scenario where a piece of diamond jewellery is set with precious stones. In this case, the transaction falls under the category of composite supply. Here, the principal supply is the diamond, while the additional services such as job work (setting the diamonds) and the provision of precious stones are considered secondary. Since the principal supply is the diamond, the entire piece of jewellery will attract 3% GST, which is the rate applicable to jewellery under HSN code 7113.

Example 2: Mixed Supply

Imagine a jeweller who promotes diamond jewellery by bundling it with an expensive watch as part of a special promotional offer. In this situation, the sale would qualify as a mixed supply, as it involves multiple items with different GST rates. Since the watch attracts an 18% GST, the entire bundled sale will be subject to the higher tax rate of 18%, rather than the usual 3% rate on diamond jewellery.

Example 3: Making Charges

Suppose a diamond jeweller sells jewellery valued at ₹5 lakh, with an additional ₹50,000 as making charges. The total value of ₹5.5 lakh will be subject to a 3% GST. Regardless of whether the making charges are billed separately, the diamond jewellery is considered the principal supply, and thus the entire amount, including the making charges, attracts the 3% GST rate. 

Example 4: Old/Used Diamond Jewellery – Exemption from GST

When a jeweller buys a customer’s old diamond jewellery, no GST is applicable on the purchase. This is because the transaction does not contribute to the furtherance of the business. Under Section 9(4) of the GST Act, the jeweller is not required to pay GST on the transaction under the reverse charge mechanism.

However, if the jeweller purchases used jewellery from a registered supplier and subsequently sells it, GST will be applicable on the total sale amount. In such cases, the jeweller can claim Input Tax Credit (ITC) on the GST paid for the second-hand jewellery, which helps offset the tax liability.

Example 5: Buying New Jewellery Instead of Old Diamond Jewellery

As noted earlier, no GST is levied on used jewellery. However, when a customer exchanges old jewellery for new, GST is applicable on the entire value of the new jewellery. For example, if a customer exchanges ₹1 lakh worth of old diamond jewellery for ₹2 lakh worth of new diamond jewellery, GST will be calculated on the full value of the new jewellery (₹2 lakh) at 3%. The price of the old jewellery (₹1 lakh) will be subtracted from the total, resulting in a final payable amount of ₹2,06,000 (inclusive of ₹6,000 GST on the new jewellery).

Example 6: Job Work for Diamond Jewellery

Job work refers to the services provided by individuals hired by jewellers for the manufacturing or processing of jewellery. A registered job worker is subject to a 1.5% GST on their services. However, if these workers are involved in reworking or repairing old or exchanged diamond jewellery, their services do not qualify as job work. Instead, such services are categorised as labour work, attracting a higher 18% GST.

GST Rates and HSN Code for Diamonds

The following table outlines the diamond HSN code and corresponding GST rates for different types of diamonds, detailing the tax implications for various diamond categories under the current GST regime.

Loose Diamonds GST rate

The Loose Diamonds GST rate (whether polished or unpolished but not mounted or set) is 0.25% under the applicable HSN codes in Chapter 71 of the GST framework.

GST on Diamond Ring

The GST on a diamond ring is levied at a rate of 3%, as per the classification under HSN Code 7113. This tax applies to the total value of the ring, including the cost of the diamond, the metal used (such as gold or platinum), and any making charges associated with its crafting. Whether purchased domestically or exchanged as part of a trade-in, the GST is calculated on the full invoice amount of the new diamond ring, ensuring compliance with the applicable tax regulations.

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FAQs on GST on Diamonds

1. What is the GST on diamonds?

The GST on diamonds is 0.25%, applicable to rough or polished diamonds that are not mounted or set in jewellery.

2. What is the diamond GST rate?

The diamond GST rate is 0.25% for loose diamonds, whether rough or polished and 3% for diamonds set in jewellery.

3. What is the GST on diamond jewellery?

The GST on diamond jewellery is 3%, which is applied to the total invoice value, including the diamond, metal, and making charges.

4. What is the diamond HSN code?

The diamond HSN code is 7102, covering diamonds that are rough, polished, industrial, or otherwise worked but not mounted or set.

5. What is the diamond GST?

The diamond GST is 0.25% for loose diamonds, including polished or unpolished, and 3% when set in jewellery.

6. What is the polished diamond GST rate?

The polished diamond GST rate is 0.25%, applicable to diamonds that are worked but not mounted or set in any form.

7. What is the loose diamonds GST rate?

The loose diamonds GST rate is 0.25%, covering both rough and polished diamonds that are not part of any jewellery.

8. What is the GST on a diamond ring?

The GST on a diamond ring is 3%, applicable to the complete value of the ring, including the diamond, metal, and making charges.