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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Yes, a GST-registered business in India may claim input tax credit (ITC) on a gold purchase when the gold is used or intended for use in its business and the other GST conditions are met. Gold is not automatically blocked from credit, but business use alone is not enough: the invoice or other prescribed document, any blocked-credit rule, and the treatment of taxable, exempt, or mixed activity also matter.
When can a business claim GST credit on gold?
Section 16(1) of the Central Goods and Services Tax Act, 2017 allows a registered person to claim input tax charged on goods or services used or intended for use in the course or furtherance of business, subject to prescribed conditions and restrictions. The Act does not categorically bar all gold purchases. Read section 16 of the CGST Act.
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Work through these checks before treating GST paid on gold as recoverable:
- Confirm the buyer is GST-registered. Section 16 frames the entitlement around a registered person.
- Establish a business purpose. The gold must be used, or intended to be used, in the course or furtherance of the business. Buying gold in a company’s name or recording it as inventory does not, by itself, establish eligibility.
- Hold the right tax document. A supplier tax invoice or another prescribed document is the basis for claiming credit, subject to applicable conditions. CBIC’s ITC FAQs and rules describe the relevant documentation framework.
- Check for blocked credit. Section 17(5) lists categories of input tax for which credit is blocked. Check whether a specific exclusion applies to the buyer and transaction; do not assume that every gold purchase is either eligible or blocked.
- Account for exempt or non-business use. Credit attributable to non-business use or exempt supplies may need to be excluded or reversed. Common inputs used for both taxable and exempt activity may require apportionment under the rules.
The answer therefore depends on the buyer, purpose, transaction documents, and the activity the gold supports. The CGST Act and CBIC materials set out the framework; they do not determine the outcome for an individual business’s facts.
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How the purchase type changes the analysis
| Transaction | What to check |
|---|---|
| Gold bullion bought by a jeweller for business | Business use, registration, valid tax document, blocked-credit rules, and whether the related activity is taxable or exempt. No separate blanket bullion entitlement follows simply from being a jeweller. |
| Finished jewellery bought by a business | Apply the same general tests. The buyer’s business purpose and use of the jewellery matter; the fact that jewellery is recorded by a business does not settle ITC eligibility. |
| Gold used partly for exempt or non-business purposes | Determine the attributable portion and apply the relevant exclusion, apportionment, or reversal rules. |
| Old gold exchanged for new jewellery | Do not treat the exchange as a straightforward invoice purchase without checking how the transaction is valued and documented. |
| Old gold sold by an unregistered business supplier | Check whether reverse charge applies and how the transaction must be reported; this differs from an ordinary purchase with GST charged on a supplier invoice. |
| Import of gold | Review the import documents and the applicable tax and credit treatment for the particular import. |
What GST rate applies to gold?
CBIC’s displayed rate schedule lists unwrought or semi-manufactured gold under heading 7108 at 3% total GST—1.5% CGST plus 1.5% SGST—and lists jewellery under heading 7113 at those rates. These are the rates shown on the CBIC GST goods and services rate schedule; check the current rate notification and the correct classification for the actual supply before filing.
Special case: a bank’s separately registered bullion business
CBIC’s sectoral FAQ discusses a specific banking provision: the optional 50% input-tax-credit mechanism under section 17(4). It says that the option applies separately to each registration and explains that a bank with a separately registered bullion business vertical may not use that 50% mechanism for bullion purchases of that vertical. See CBIC’s sectoral FAQ.
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This example concerns a bank and its special credit method. It does not impose a general 50% reduction on gold ITC for jewellers or other businesses, nor does it replace the ordinary section 16 and section 17 checks.
Old-gold exchanges and gold-metal loans need separate treatment
Old jewellery exchanged for new jewellery
CBIC’s general FAQ gives an example in which a customer sells 10 grams of gold and buys a 20-gram jewellery set. For that example, it says GST is charged on the open-market value of the entire transaction under Rule 27(a). Separately, CBIC’s sectoral FAQ says an individual selling personal old jewellery is not making a supply in the course or furtherance of that individual’s business; sale of old gold by an unregistered business supplier can instead attract reverse charge. These are different fact patterns, so a business should identify who is selling, whether the sale is in the course of business, and how the exchange is structured. CBIC general FAQs and CBIC sectoral FAQs.
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Gold-metal loans to jewellers
CBIC describes a gold-metal loan as a financing arrangement and says the bank’s supply of gold occurs when it delivers the metal to the jeweller. The bank should invoice at delivery; if the price is not yet fixed, the value may be based on the market rate. This explains the supply timing for that arrangement, but it does not by itself decide the jeweller’s ITC entitlement. CBIC sectoral FAQs.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to review before claiming ITC
- GST registration details for the claimant and the correct registration receiving the supply.
- The supplier’s tax invoice or relevant import document, and whether it identifies the transaction correctly.
- Evidence of the gold’s intended business use and its accounting treatment.
- The taxable, exempt, or mixed nature of the output activity the gold supports.
- Whether the transaction is an exchange, a purchase from an unregistered business supplier, an import, or a gold-metal loan.
- Any current amendments, notifications, or classification changes relevant to the claim.
For a non-routine transaction or a material claim, have the documents and intended-use facts checked by a qualified Indian GST professional before filing.
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