Guide for jewellers · GST
GST on old gold
How GST works when a customer exchanges old gold for new jewellery, when a jeweller buys old gold outright, and when used jewellery is sold again as it is or melted down. Plus the income tax rules on paying for it.
Is GST charged on old gold?
In an exchange, GST at 3% is charged on the full value of the new jewellery, and the old gold's value is taken off what the customer pays, as a payment. When a registered jeweller buys old gold from an individual who is not registered, no GST is payable on the purchase: the reverse charge on supplies from unregistered persons applies since February 2019 only to categories the government notifies, and old gold is not among them. If used jewellery is sold again as it is, without input tax credit, GST can be paid on the margin under Rule 32(5) of the CGST Rules; melted gold made into new jewellery is taxed at 3% on its full value.
Updated 5 November 2026.
Exchange: old gold for new jewellery
- GST is on the open market value of the new jewellery (GJC FAQ, query 5)
- The old gold is valued by weight and tested purity, less the shop's deduction
- Its value is deducted after GST, like a payment
- Record the old gold's weight, purity and value on the bill
Buying old gold from a customer
- No GST on a purchase from an unregistered individual
- No input tax credit either, because no GST was paid
- Give a purchase voucher with the seller's ID, the weights, touch, fine gold and amount
- A purchase from a registered dealer comes with 3% GST, which you can claim as credit
Selling it again
- Melted and made into new jewellery: 3% GST on the new jewellery's full value
- Sold as it is, only cleaned and polished, without input tax credit: GST can be paid on the margin (selling price less purchase price) under Rule 32(5)
- The Karnataka AAR allowed the margin scheme for used jewellery sold after cleaning and polishing (Aadhya Gold, 2021) but refused it for gold melted into lumps (White Gold Bullion, 2023)
- Advance rulings bind only the applicant; take your CA's view before using the margin scheme
Paying for old gold: income tax
- A purchase above ₹2 lakh in one transaction needs the seller's PAN or Form 60 (Rule 114B)
- Do not pay ₹2 lakh or more in cash to one person for one deal: section 269ST bars the receipt
- Cash payments above ₹10,000 to one person in a day can be disallowed as an expense (section 40A(3)); pay by bank transfer or UPI
| Gross weight | 20.400 g | |
|---|---|---|
| Less: stones and dirt | 0.400 g | |
| Net weight | 20.000 g | |
| Fine gold | 20.000 g × 91.6 touch ÷ 100 | 18.320 g |
| Value | 18.320 g × ₹7,900 (24K) | ₹1,44,728 |
| Less: deduction 2% | − ₹2,894.56 | |
| Paid to the customer | rounded | ₹1,41,833 |
Rates for illustration. No GST on a purchase from an individual. Pay by bank transfer, as the amount is above ₹10,000; the seller's PAN is needed only above ₹2 lakh.
Sources: GJC: GST FAQs for the gems and jewellery industry · CBIC tax information portal (GST Acts, Rules and rate notifications) · GST Council: advance rulings (Karnataka AAR, KAR/ADRG/35/2021)
FAQ
Frequently asked questions
What is the GST rate on an old gold purchase?
Nil when a jeweller buys old gold from an individual who is not registered under GST. 3% when it is bought from a registered dealer, and that 3% can be claimed as input tax credit.
Is GST charged when I exchange old gold for new jewellery?
Yes, on the new jewellery: 3% of its full value. The old gold reduces what you pay; it does not reduce the value on which GST is charged.
Does a jeweller pay GST on old gold bought from customers?
No, when the seller is an individual who is not registered. The reverse charge does not apply to such purchases since February 2019.
What is the margin scheme for old jewellery?
Rule 32(5) of the CGST Rules lets a dealer in second-hand goods who has not taken input tax credit pay GST on the difference between the selling and purchase price. It suits used jewellery resold as it is; it does not apply once the gold is melted or made into something new.
Can a jeweller pay cash for old gold?
Keep cash to ₹10,000 or less per person per day, or the payment may be disallowed as an expense under section 40A(3), and never ₹2 lakh or more for one deal, which section 269ST bars the seller from receiving. Pay larger amounts by bank transfer or UPI.
Do I need the seller's PAN?
For a purchase above ₹2 lakh in one transaction, yes: PAN, or Form 60 if the seller has none (Rule 114B).
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