Jewelry Store Compliance Guide 2026: BIS, GST, PMLA, and Everything Indian Jewelers Must Follow

Introduction: Navigating the Regulatory Maze for Indian Jewelers

The regulatory environment for Indian jewelry retail has undergone a seismic shift over the past five years. What was once a largely informal industry with minimal government oversight has transformed into one of the most regulated retail sectors in the country. From mandatory hallmarking to stringent anti-money laundering (AML) requirements, from GST e-invoicing to PAN card collection on high-value sales — the compliance burden on a jewelry store owner in 2026 is substantial, complex, and carries severe penalties for non-compliance.

Consider the case of Dinesh Patel, a well-respected jeweler in Ahmedabad who had been in business for 25 years. In early 2025, a routine inspection by BIS officials found that 12 pieces in his display did not carry valid HUID hallmarks. The penalty: ₹5 lakh fine and a 3-month suspension of his hallmarking license. In a separate audit, his GST returns showed discrepancies in old gold purchase documentation, triggering an additional ₹2.3 lakh demand notice. These penalties, totaling over ₹7 lakh plus legal costs, could have been avoided entirely with proper compliance systems.

This guide provides a comprehensive, practical overview of every major compliance requirement facing Indian jewelry store owners in 2026, organized by regulatory domain, with specific action items, timelines, and penalty structures.

BIS Registration and Hallmarking Requirements

Mandatory Hallmarking: The Current Rules

As of April 2026, the sale of gold jewelry without BIS hallmarking is prohibited across India for articles of 14K, 18K, 20K, 22K, and 24K purity. Every piece of gold jewelry sold must carry the HUID (Hallmark Unique Identification) — a unique 6-character alphanumeric code that can be verified through the BIS Care app or website.

The hallmark now consists of three marks: the BIS Standard Mark (a triangular logo), the purity/fineness number (585, 750, 833, 916, or 999), and the 6-character HUID. The older four-mark system that included the jeweler's mark and the assaying centre's mark has been replaced by the HUID system, which provides complete traceability.

BIS Registration Process

Every jeweler selling hallmarked gold jewelry must hold a valid BIS registration. The registration process involves submitting Form V online through the BIS portal (manakonline.bis.gov.in), paying the registration fee based on your turnover slab, providing required documents including GST certificate, shop establishment license, and identity proof, and receiving an inspection visit from BIS officials.

HUID Compliance at the Store Level

At the store level, HUID compliance requires that every piece of gold jewelry in your display and stock has a valid HUID tag. Your billing system must print the HUID on every sales invoice. You must maintain records linking each HUID to its purchase source (from whom you acquired the hallmarked piece). Customer returns or exchanges require HUID reconciliation in your records. Pieces received from karigar workshops must be sent for hallmarking before they are offered for sale.

Vijay of Mahalaxmi Jewellers in Pune maintains a dedicated HUID register — a simple spreadsheet that tracks every HUID entering his store (from suppliers or hallmarking centres), its status (in stock, sold, returned, melted), and the associated document reference. This register takes 15 minutes daily to update but provides complete audit readiness.

Hallmarking of Existing Stock

A common challenge: what do you do with old stock that was manufactured and purchased before the HUID mandate? The answer is clear — such stock must be sent for hallmarking before sale. You cannot sell un-hallmarked gold jewelry under any circumstance. If sending old stock for hallmarking is impractical (damaged hallmarks, pieces too delicate for the process), you must either melt and recast the pieces or sell them as "gold by weight" with clear documentation and the customer's signed acknowledgment.

GST Compliance for Jewelry Stores

GST Rates and HSN Codes

The 3% GST on gold jewelry is applied on the total invoice value, which includes the gold value plus making charges. This is a critical point — making charges are not separately taxed at a higher rate when sold as part of a finished jewelry piece. However, standalone making charges (when a customer provides their own gold for jewelry making) attract 5% GST as a job work service.

Invoice Requirements

Every jewelry sale invoice must include the GSTIN of the seller, a consecutive invoice number, date of issue, buyer's name and address (mandatory for B2B; recommended for B2C above ₹50,000), HSN code for each line item, quantity and unit of measurement (grams for gold, carats for stones), value of supply including making charges, applicable GST rate and amount, HUID of each piece sold, and the total invoice value in words. Failure to issue proper invoices or maintain invoice records can result in penalties of ₹10,000 per instance or the tax amount, whichever is higher.

E-Invoicing and E-Way Bill

As of 2026, e-invoicing is mandatory for businesses with turnover above ₹5 crore. This requires generating invoices through the GST e-invoice portal (einvoice.gst.gov.in), obtaining an Invoice Reference Number (IRN) for each invoice, and printing the QR code on the invoice. E-way bills are required for movement of goods valued above ₹50,000. For jewelry stores, this primarily applies to stock transfers between branches or to exhibitions.

Old Gold Purchase and Reverse Charge

When you purchase old gold from individuals (unregistered persons), the reverse charge mechanism (RCM) applies. You must pay GST at 3% on the purchase value, issue a self-invoice, and report this in your GSTR-3B under the RCM section. This is one of the most commonly misunderstood and mishandled GST provisions in jewelry retail. Many stores either ignore RCM on old gold purchases or apply it incorrectly, creating significant audit risk.

Annual GST Return Filing Calendar

KYC Requirements for High-Value Sales

PAN Card Requirements

PAN card details must be collected and reported for cash transactions exceeding ₹2 lakh. This applies per transaction, not per day or per customer. If a customer makes a single purchase of ₹2,50,000 and pays any portion in cash, PAN card details are mandatory. If the same customer makes two purchases of ₹1,50,000 each on the same day, PAN is technically required if total cash payment exceeds ₹2 lakh across both transactions.

Cash Transaction Limits

Section 269ST of the Income Tax Act prohibits receiving ₹2 lakh or more in cash from a single person in a day, in respect of a single transaction, or in respect of transactions relating to one event or occasion. The penalty for accepting cash above this limit is an amount equal to the cash received — effectively a 100% penalty. This means if you accept ₹3 lakh in cash for a single sale, the penalty is ₹3 lakh.

Train every billing counter staff member on this rule without exception. Renu Jewellers in Kanpur avoids confusion by maintaining a prominent sign at the billing counter: "Cash payments limited to ₹1,99,999 per transaction. Higher amounts accepted via card, UPI, cheque, or bank transfer."

Form 60/61 for Customers Without PAN

Not every customer has a PAN card, particularly in semi-urban and rural areas. For transactions requiring PAN where the customer does not have one, collect Form 60 (declaration by a person who does not have a PAN). Ensure the form is completely filled — name, address, income source, and the reason for not having PAN. Incomplete Form 60s are treated as non-compliance during audits.

PMLA Compliance for Jewelers

Understanding PMLA Requirements

The Prevention of Money Laundering Act (PMLA) classifies jewelers as "Designated Non-Financial Businesses and Professions" (DNFBPs) when they deal in cash transactions of ₹10 lakh or more. This triggers comprehensive compliance obligations.

As a PMLA-designated entity, you must appoint a Principal Officer responsible for PMLA compliance, establish and implement a KYC/AML policy, conduct Customer Due Diligence (CDD) for transactions of ₹10 lakh or more, file Suspicious Transaction Reports (STRs) with the Financial Intelligence Unit (FIU-IND), file Cash Transaction Reports (CTRs) for cash transactions of ₹10 lakh or more in a month, maintain transaction records for 5 years after the business relationship ends, and conduct periodic employee training on AML/CFT procedures.

Customer Due Diligence Process

For transactions triggering PMLA, collect the following: certified copy of PAN card, proof of identity (Aadhaar, passport, voter ID, or driving license), proof of address (utility bill, bank statement, or Aadhaar), recent photograph (for new customers), and source of funds declaration for very high-value transactions. Maintain these records in a dedicated PMLA file — physical or digital — separate from regular sales records.

Suspicious Transaction Reporting

Train your staff and principal officer to identify red flags that may indicate money laundering. These include a customer making multiple just-below-threshold transactions (structuring), transactions inconsistent with the customer's known income or profession, customers who are reluctant to provide identification, unusual interest in repurchase or buyback policies immediately after purchase, and large purchases followed by quick resale at a loss.

When suspicious activity is identified, file an STR with FIU-IND within 7 days through the FINNET 2.0 portal. The filing is confidential — you must not inform the customer that an STR has been filed. Non-filing of STRs when warranted can result in penalties up to ₹10 lakh and even criminal prosecution.

Record Keeping Requirements

What Records Must Be Maintained

Digital Record Keeping Best Practices

Maintain digital copies of all critical documents using a consistent naming convention. Scan KYC documents at the point of collection rather than later. Back up records to cloud storage weekly. Ensure your POS system generates exportable reports for each record category. Consider implementing document management software — even a simple folder structure on Google Drive or OneDrive provides searchable, accessible, backed-up records at minimal cost.

Annual Renewals and Compliance Calendar

Key Renewal Dates

Creating a Compliance Calendar

Nirmala of Nirmala Gold in Madurai uses a simple Google Calendar with reminders set 60, 30, and 7 days before each compliance deadline. Each calendar entry includes the renewal procedure link, the person responsible, and the estimated cost. This ₹0 tool has prevented three potential penalties in the past year, saving an estimated ₹1.5 lakh.

Penalties for Non-Compliance

BIS Act Penalties

Selling jewelry without valid BIS hallmark carries a penalty of up to ₹1 lakh for the first offense and ₹5 lakh for subsequent offenses. Selling jewelry with a fake or tampered hallmark is a criminal offense carrying imprisonment up to 1 year, a fine up to ₹5 lakh, or both. Operating without valid BIS registration can result in seizure of stock and a fine up to ₹2 lakh. Using hallmarking services from non-recognized Assaying and Hallmarking Centres voids the hallmark and creates the same liability as selling un-hallmarked jewelry.

GST Penalties

Tax evasion or fraud carries a penalty of 100% of the tax amount or ₹10,000, whichever is higher. Late filing of returns attracts ₹50 per day for GSTR-3B and ₹200 per day for GSTR-1 (combined maximum capped at ₹5,000 per return for nil returns). Wrong claim of input tax credit attracts a penalty equal to the credit wrongly claimed plus 24% annual interest. Non-issuance of invoices carries ₹25,000 per instance.

Income Tax Penalties

Accepting cash above ₹2 lakh triggers a 100% penalty on the amount received. Non-deduction of TDS on applicable payments results in interest at 1% per month and a penalty equal to the TDS amount. Non-filing of tax returns by the due date attracts a fee of ₹5,000 (₹1,000 if income is below ₹5 lakh).

PMLA Penalties

Failure to maintain records: up to ₹10 lakh per default. Failure to file CTR/STR: up to ₹10 lakh and potential criminal prosecution. Non-appointment of Principal Officer: regulatory action including business restrictions. These penalties are severe because PMLA violations are treated not as mere administrative lapses but as potential facilitation of money laundering.

Practical Compliance Implementation

Building a Compliance Team

Even a small jewelry store needs at least one person responsible for compliance. In stores with fewer than five employees, this is typically the owner themselves. Larger stores should designate a compliance officer — often the accounts manager — with clear responsibilities documented in writing. This person should receive formal training on GST, PMLA, and BIS requirements, either through online courses (several are available on Coursera and Udemy at ₹500 to ₹3,000) or through workshops conducted by the GJC or local jeweler associations.

Technology Solutions for Compliance

Modern jewelry POS systems handle many compliance requirements automatically — GST invoice generation, HUID tracking, PAN collection prompts for high-value transactions, and record archival. Invest in a system that generates compliance reports with minimal manual effort. Additionally, use GST return filing software like ClearTax or Zoho Books (₹5,000 to ₹15,000 annually) to automate return preparation and filing.

Working with Professionals

Maintain relationships with a chartered accountant experienced in jewelry sector GST, a lawyer familiar with BIS and PMLA regulations, and an insurance advisor who understands jewelry business risks. The combined annual cost for professional compliance support typically ranges from ₹50,000 to ₹2,00,000 for small to mid-size stores — a fraction of potential penalty exposure.

Frequently Asked Questions

1. Can I sell gold jewelry without hallmarking if the customer signs a waiver?

No. The mandatory hallmarking requirement under the BIS Act is a legal obligation that cannot be waived by customer consent. Selling un-hallmarked gold jewelry — regardless of any waiver or declaration signed by the customer — is a punishable offense. The only exceptions are exports, jewelry for government supplies as per notification, and watches with gold components.

2. Do I need separate GST registration for each branch?

Yes, you need separate GST registration in each state where you have a business presence. Within the same state, you may choose to have a single registration or multiple registrations. However, each physical location must be added as an additional place of business in your registration. Stock transfers between branches in different states must be documented with invoices and e-way bills.

3. What is the penalty if I accidentally sell a piece with an incorrect hallmark?

If the error is genuine (manufacturing defect, incorrect tagging by the Assaying Centre), you should report it to the relevant Assaying Centre and BIS immediately. Cooperating with authorities and demonstrating that the error was unintentional typically results in a warning rather than a full penalty. However, repeated instances of "accidental" incorrect hallmarks will be treated as deliberate non-compliance, attracting the full penalty of up to ₹1 lakh.

4. Are silver jewelry items also subject to mandatory hallmarking?

As of April 2026, silver hallmarking remains voluntary in India, though BIS has signaled that mandatory silver hallmarking will be implemented in phases. Silver articles that are voluntarily hallmarked must meet BIS standards (IS 2112) and carry the BIS hallmark with purity markings (990 for fine silver, 925 for sterling silver). Forward-thinking store owners are already hallmarking silver voluntarily to build customer trust and prepare for the eventual mandate.

5. How do I handle GST on gold exchange transactions?

When a customer exchanges old gold for new jewelry, the transaction has two components: a purchase of old gold from the customer (3% GST under reverse charge) and a sale of new jewelry to the customer (3% GST on forward charge). Both must be separately documented. The net amount payable by the customer after adjusting the old gold credit should be clearly shown on the invoice. Your CA can help structure the accounting entries correctly.

6. What PMLA records do I need to maintain for walk-in cash customers?

For cash transactions below ₹10 lakh, maintain standard sales records (invoice, KYC if above ₹2 lakh). For cash transactions of ₹10 lakh or more, full Customer Due Diligence is required: identity verification, address verification, source of funds declaration, and risk categorization. These records must be maintained for 5 years after the last transaction with that customer. File a CTR with FIU-IND for any customer whose cash transactions total ₹10 lakh or more in a calendar month.

7. Is a fire safety certificate really necessary for a jewelry store?

Yes, and it serves dual purposes. First, it is a legal requirement in most states under fire safety regulations. Second, your insurance company will require a valid fire safety certificate for your stock insurance to be valid. A fire safety certificate typically requires functional fire extinguishers (minimum 2 for a small store), fire-resistant safe or vault for overnight storage, clear emergency exits, and fire alarm system (for stores above a certain area). Annual renewal through the local fire department costs ₹2,000 to ₹10,000 depending on store size and city.

8. How should I handle returns of hallmarked jewelry?

When a customer returns a hallmarked piece, issue a credit note with the original HUID referenced. The returned piece goes back into your inventory with the same HUID. If the piece is melted or sent for remaking, document the HUID as "retired" in your register with the reason. The new piece created from the melted gold will receive a new HUID when re-hallmarked. Maintain a clear audit trail linking the original HUID to the credit note to the retired status.

9. Do making charges on repair work attract 3% or 5% GST?

Repair services attract 5% GST under SAC code 9987. This is distinct from making charges on new jewelry, which are part of the finished product price and attract 3%. If repair work involves supplying new gold (e.g., adding gold during ring resizing), the gold component attracts 3% and the service component attracts 5%. Separate these on the invoice. If you supply both material and service, charge 5% GST on the entire value unless the material component exceeds 75%, in which case specific composition rules apply — consult your CA for precise treatment.

10. What happens during a BIS inspection of my store?

BIS officials may conduct unannounced inspections. They will check that all jewelry on display carries valid HUID hallmarks, verify that your BIS registration certificate is current and displayed, examine your invoicing records for HUID documentation, potentially purchase items for testing at an independent laboratory, and check that no un-hallmarked gold jewelry is being offered for sale. Cooperation is essential. Obstructing a BIS inspector is a separate offense. Maintain inspection readiness at all times by ensuring every piece on display is hallmarked and your records are current.

11. Do I need to register under the Shops and Establishments Act?

Yes, every jewelry store must register under the relevant state's Shops and Establishments Act within 30 days of commencing operations. This registration governs working hours, weekly holidays, employee conditions, and basic labor law compliance. The registration is typically obtained from the municipal corporation or local labor department. Fees range from ₹200 to ₹5,000 depending on the state and number of employees. Non-registration can result in fines and, in extreme cases, closure orders.

12. How do I stay updated on changing compliance requirements?

Subscribe to notifications from the BIS website (bis.gov.in), the CBIC portal for GST updates (cbic.gov.in), and the FIU-IND portal for PMLA updates. Join the Gem and Jewellery Domestic Council (GJC) which regularly circulates compliance alerts to members. Follow your state jewelers' association communications. Attend at least one compliance update seminar per year — most are conducted free by the GJC, state associations, or accounting firms. Finally, maintain a close relationship with your CA, who should proactively alert you to changes affecting your business.

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Stay compliant and find BIS-registered jewelers near you through our store directory. Use our gold rate tools for accurate pricing, and explore our compliance resources for regular updates on jewelry regulations.