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November 7, 2025

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GST Rates & HSN Code 7112 for Precious Metal Waste

Introduction

Learnings from GST implications on precious metals waste are essential especially to traders/investors of these valuable resources. HSN code 7112 which is among the most important HSN codes under Chapter 71 of the Customs Tariff Act, is the concrete HSN code, which concerns waste and scrap of precious metal or precious metal clad with precious metal.

This elaborate guide will explain the GST Rate & HSN Code 7112 for Precious Metal Waste, scope, classification, input tax credit (ITC), and compliance requirements of HSN Code 7112.

What is HSN Code 7112?

HSN Code 7112 belongs to Chapter 71 – Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof; coin. Specifically, HSN 7112 pertains to: Metal waste or scrap of precious metal or metal clad in precious metal; other waste and scrap that contain precious metal or precious metal compounds, of a kind used primarily for the recovery of precious metal.

Common Metals Covered Under HSN 7112

Gold (including scrap, used jewellery)
Silver
Platinum
Palladium
Rhodium
Waste from jewellery manufacturing
Used electrical components containing trace precious metals

Sub-classification of HSN Code 7112

HSN Code	Description
7112 9100	Gold, including metal clad with gold, unwrought or in semi-manufactured forms, or powder form
7112 9200	Platinum, including metal clad with platinum, unwrought or in semi-manufactured forms, or in powder form
7112 9900	Other (including silver or mixed metal scrap)

Why Is HSN Code 7112 Important?

Waste and scrap of precious metals have intrinsic value due to the possibility of refining and recovery. These materials are frequently used in:

Jewellery remanufacturing
Industrial recycling
Electronic waste processing
Financial transactions involving bullion

Correct classification ensures proper GST compliance and enables businesses to claim ITC effectively.

GST Rate on Precious Metal Waste under HSN 7112 (as of 2025)

As per the latest updates from the Central Board of Indirect Taxes and Customs (CBIC):

HSN Code	Description	GST Rate
7112	Waste and scrap of precious metals or metals clad with precious metal	3%

📌 Note: The GST rate of 3% applies uniformly across all sub-categories under HSN 7112.

GST Rate Comparison: Precious Metal Waste vs. Finished Goods

Category	HSN Code	GST Rate
Precious metal waste (scrap)	7112	3%
Gold Jewellery	7113	3%
Silver Articles	7114	3%
Industrial use (electronic parts with trace metals)	Depends on component	Usually 18%

Thus, scrap and waste enjoy a lower tax slab as compared to processed components unless they qualify under HSN 7112.

Input Tax Credit (ITC) on HSN Code 7112

Businesses dealing in precious metal waste can claim ITC on the tax paid during the purchase of goods under HSN Code 7112, subject to GST rules:

Buyer must be registered under GST.
Seller must issue a valid tax invoice.
Goods must be received and used for business purposes.
The seller must file GSTR-1 and GSTR-3B properly to ensure credit flows to the buyer.

Best Practice: Verify GST compliance of the seller using the GST portal before large-scale scrap purchases.

GST Implications for Various Stakeholders

1. Jewellery Manufacturers

Receive scrap from customers as old jewellery
Can sell scrap under HSN 7112 with 3% GST
Eligible to claim ITC if used in further manufacturing

2. Scrap Dealers

Must classify materials accurately under HSN 7112
Issue tax invoices with GST if registered
Maintain purchase and sale records diligently

3. Electronic Waste Recyclers

Components with trace precious metals fall under 7112 if used mainly for recovery
GST @3% applies if the component is not usable in its original form

4. Banks & NBFCs (Gold Loans)

May sell unclaimed pledged gold as scrap under 7112
Required to pay 3% GST when selling the gold as waste

GST Invoicing Rules for HSN 7112

HSN Code must be mentioned on B2B invoices (mandatory for turnover > ₹5 crore)
GST of 3% should be indicated
If the scrap is received as a consideration, the valuation rules under Rule 27–30 of the CGST Rules may apply

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Reverse Charge Mechanism (RCM) Applicability

RCM does not apply to the purchase of precious metal scrap from registered dealers. However, it may apply in the following cases:

Purchase from unregistered dealers (under certain notified categories)
Import of precious metal waste — IGST is applicable under reverse charge

💡 Tip: Always check the supplier's registration status to determine RCM applicability.

Import of Precious Metal Waste: GST & Customs Duty

When importing scrap under HSN 7112:

Tax Component	Rate
Basic Customs Duty (BCD)	0% to 12.5% (varies by metal type)
IGST	3%
Social Welfare Surcharge	10% of BCD (if applicable)

Clear classification at the time of import helps in accurate IGST payment and customs compliance.

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Documentation Required for Compliance

GST Registration
Tax Invoice mentioning HSN 7112
Purchase records & weighing slips
Testing or assay reports (especially for imported or refined materials)
E-way bills for movement of goods (if value > ₹50,000)

Recent Legal Clarifications & Circulars (CBIC)

In several Advance Rulings, it has been held that:

Old jewellery melted into bars qualifies as "waste" if it is not meant for sale as jewellery.
Used precious metal contacts from electronic devices also qualify under HSN 7112 if processed for recovery.

📝 Example: In the case of M/s Attica Gold Pvt. Ltd., authorities clarified that gold received from customers in exchange qualifies under HSN 7112 when sold as scrap.

Market Trends & Impact of GST on Precious Metal Waste

Positive Impacts:

Uniform GST rate of 3% reduces tax cascading
Legal clarity in classification helps smooth trade
ITC availability improves working capital for refiners

Challenges:

Difficulties in assessing purity and value
Gray market trade without invoices
RCM confusion for imports and unregistered purchases

Conclusion

The precious metals recycling and scrap trade in India is critically served by the HSN code 7112. Lightweight GST rate of 3% on a flat rate guarantees an easy tax system for businesses that trade in waste or scrap of gold, silver, platinum, or precious metals. However, accurate classification, documentation & GST compliance are necessary to prevent penalty and smooth input credit.

As the government continually simplifies GST norms, gold traders, refiners, recyclers, and industrial users need to be aware of HSN 7112 compliance as well.

Also read about various Precious Stones and their GST rates.

FAQs

1. Is 3% GST applicable to both gold and silver scrap?

Yes, both gold and silver waste fall under HSN 7112 and attract 3% GST.

2. What if I sell old jewellery without melting it?

It is considered used jewellery, not scrap. The classification would fall under HSN 7113 and still attract 3% GST.

3. Can I claim ITC on scrap purchases?

Yes, provided you meet all conditions under the CGST Act.

4. Is there GST on exported scrap?

No GST is levied on exports, but a Letter of Undertaking (LUT) or the IGST refund method must be followed.

5. How should I value scrap metal for GST purposes?

If the scrap is not sold but exchanged (e.g., old gold for new), valuation must be based on the open market value or as per Rule 27 to Rule 30 of the CGST Rules.

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