GST on a making charge is 5% where the making is a supply of service on its own, and 3% where it sits inside a finished piece you sold as one thing. The 18% answer describes a third situation, and it is worth knowing which one you are in before you copy it onto a bill.
Which of the two you are in follows from what you actually sold, whatever the bill happens to call it: a ready necklace lifted off your own tray is one supply, labour on gold that walked in on somebody else’s wrist is another.
The same distinction runs through what happens between the metal and the bench, and on a bridal piece it is worth real money. Write a making charge at 5% where 3% belonged and the bill changes by two per cent of that making charge. Write it at 18% and the bill changes by fifteen per cent of it.
None of this is tax advice. Every rate here carries the section or the notification it turns on, so your CA can check a line in a minute.
Where do the three different answers come from?
All three are in circulation, and each is describing a different situation. Almost none of the pages carrying them names the section or the notification it rests on, which is why all three sound equally sure.
| The answer | Where it turns up | What it is describing | When it fits your bill |
|---|---|---|---|
| 3% on the whole value | Counter bills, rate cards, jeweller pages | One composite supply of goods, taxed at the rate of its principal supply | A finished piece sold ready-made |
| 3% on metal, 5% on making | Accountancy write-ups, and the Gold Making-Charges Calculator on this bench | Two supplies, one of goods and one of service, billed apart | Making billed on its own, as work done on metal that is not yours |
| 3% on metal, 18% on making | Invoice-template and billing-app write-ups | The rate a service falls to when no more specific entry reaches it | Read the section below before you use it at all |
The first two describe two different transactions, and a shop that does both kinds of work issues both kinds of bill in one week. The third spreads fastest, because a template gets copied whole and nobody re-reads a default.
Why does a ready-made piece carry one rate on the whole bill?
Three things went into the piece on your tray, and the law still counts what you hand over as one supply. Section 2(30) of the CGST Act calls that a composite supply: two or more supplies naturally bundled and supplied together in the ordinary course of business, one of which is the principal supply. Section 8(a) then taxes the whole of it at the rate the principal supply carries.
On a necklace out of your own tray, the principal supply is the necklace, and the metal, the stones and the mazdoori reach the buyer as one thing: she cannot leave the making behind and take only the gold. So the whole value carries the goods rate, 3%, with the making sitting inside it.
Show making as its own line if the customer wants to read the arithmetic; the transaction stays one supply and the rate stays one rate.
Plenty of retail bills still show 3% on metal and 5% on making for pieces sold ready-made. That is the one place jewellers genuinely disagree with each other. The disagreement is why the two calculators here open differently: the Gold Making-Charges Calculator applies the split to every piece, while the Wastage (VA%) Calculator opens on a single 3% and offers the split beside it. Section 8 is what closes the argument, read against your own transaction and with the person who signs your return.
When is making a service I bill on its own?
The gold walked in on somebody else’s wrist, no piece of yours is sold, and what you supply is the labour on it — your own, or your karigar’s — which makes the making a supply of service in its own right. Section 2(68) of the CGST Act calls that job work, and defines it as any treatment or process undertaken by a person on goods belonging to another registered person.
Three things change on the paper.
- The taxable value is the making charge alone. The other side’s metal was never sold, so it never enters the value you tax.
- The row carries 9988, the service code for the work, where a piece sold would have carried 7113.
- The metal goes out on a delivery challan and comes back on one, because nothing was sold when it left and nothing was sold when it returned.
Keep the challan number written against the issue entry in your issue book. When somebody asks why a lakh of gold moved through the shop with no invoice behind it, metal that left on paper and came back on paper is the whole answer.
Where does the 18% figure come from?
Open notification 11/2017-Central Tax (Rate) at its residual entry — the line that picks up whatever the specific entries leave out — and 18% is what sits there: the rate a service falls to when no more specific entry covers it. It is the same notification that carries the job-work entries. The question worth arguing is which entry covers your work, and the 18% figure reaches a jewellery seller by three routes.
The first is a setting nobody changed. A general invoicing app, written for counters of every trade, ships with its tax field already filled in, and whatever it opens on is a default. One write-up inherits that default, a second copies the first, and by the third copy a setting is being read as law. Open your own billing software and look at what sits in that field before you trust a total it printed.
The second starts with the definition itself. Section 2(68) defines job work as work on goods belonging to another registered person, and a customer who walks in with her mother’s bangles is not registered. Which entry then covers that work is a real question, and it is answered against the entries under heading 9988 in notification 11/2017-Central Tax (Rate) as amended, read on the day, with your CA. The invoice maker on this bench bills job work under 9988 at 5%; if your CA reads the current entry another way, have that conversation before you print a month of bills.
The third is that 18% really does turn up around a jewellery business, on the commission a marketplace charges you. A seller who reads a settlement report on Monday and writes a making charge on Tuesday can carry the number straight across into a different pile of money entirely.
Whichever way that second question goes, get to the answer on purpose. A dropdown you never chose is a poor reason to be printing 18%.
The same piece billed three ways — what is the gap in rupees?
Take one piece and write it three ways. The inputs below are assumed so the arithmetic reads cleanly; yours come off the bhav your association board posts in the morning.
Assume 20 g of net weight at a round ₹10,000 a gram for the karat billed. That is ₹2,00,000 of metal. Assume ₹24,000 of making, which is 12% of it.
| How it is billed | Tax on the metal | Tax on the making | GST total | Bill total |
|---|---|---|---|---|
| Ready piece, one composite supply at 3% | ₹6,000 | ₹720 | ₹6,720 | ₹2,30,720 |
| Metal at 3%, making at 5% | ₹6,000 | ₹1,200 | ₹7,200 | ₹2,31,200 |
| Metal at 3%, making at 18% | ₹6,000 | ₹4,320 | ₹10,320 | ₹2,34,320 |
The first row is worked on the whole ₹2,24,000 at once, and is split across the two tax columns only so the three rows read against each other.
Between the first two rows there is ₹480, which is two per cent of the making charge — the distance between 3% and 5%. The third row differs from the first by ₹3,600, or fifteen per cent of the making charge.
On a machine-made chain with almost no labour in it, getting this wrong costs a rounding difference nobody notices. On a bridal set where the making runs to a quarter of the metal value, it costs you the profit on the piece.
Quotes written in VA terms need one step first. VA is value addition, the South-Indian wording for wastage as a percentage of metal value, and it has to become a plain making charge before a tax line means anything.
Getting the arithmetic right still leaves one question open: which of the three rows describes what you actually sold.
What can a customer reasonably ask me to show on the bill?
A customer asking about a tax line is almost never asking about the tax. She is asking why this bill and the one her sister brought home last month do not match. Usually the two pieces were sold in two different ways: one lifted off a tray ready-made, the other made on gold the customer carried in herself.
Five things a bill should be able to show before any argument starts.
- Gross and net weight as two separate figures, since metal value is charged on net.
- The rate used, and the karat it belongs to. A rate quoted for one karat and applied to another is the first error to look for, before any tax line.
- The making charge, and what it is a percentage of: metal value, gross weight, or a flat amount for the piece.
- Each tax line with the value it was worked on beside it, so anyone can see which rate sat on which figure.
- The code on the row — 7113 where a piece was sold, 9988 where only labour was.
One request you cannot meet: a customer on a job-work bill asking why the making is not taxed at the metal rate. Her gold was never sold to her, so that bill carries no metal in its taxable value and nothing for the goods rate to sit on.
If your bill shows making as its own line and still taxes the whole value at a single rate, say so in one sentence on the bill itself. A customer who sees a breakup and a single rate together assumes somebody has made a mistake.
Where do I read the law myself before I change my bill format?
Read these four in the order they are listed, because the first two decide which of the last two you are even in. All four are published free by the CBIC.
- Composite supply: sections 2(30), 2(90) and 8 of the CGST Act. What a bundled supply is, what the principal supply is, and the rate the whole of it takes.
- Job work: section 2(68) for the definition, and section 143 for the procedure of sending goods out for work and getting them back.
- The goods rate: the entry against heading 7113 in notification 1/2017-Central Tax (Rate), as amended.
- The service rates: the entry against heading 9988 in notification 11/2017-Central Tax (Rate), as amended.
The Act itself changes rarely. Both notifications change by amendment, so the entry that matters is the one standing on the day you open it, which is why they are named here by number for you to read at source. A rate forwarded to you as a screenshot has no date and no entry number on it, so you cannot tell which amendment it was ever true under.
Before you change a format, do this on a bill you have already issued. Take last month’s largest making charge and total that piece on one 3% and on the 3% + 5% split. Print the sheet, put it in front of your CA, and ask one question: which supply was this? A format you changed because of a blog post has to be changed back on every bill you issued in between, so let the answer come first and the format follow it.