October 26, 2022 | | Uncategorized |

This article discusses the application of VAT laws regarding the making charges received by gold jewelers. The gold and products consisting mostly of gold are collectively referred to as “Gold Items”

As per the Cabinet Decision No. 25 of 2018 are met, Tax registrants supplying gold and diamonds are not required to charge VAT on the supply of gold and diamond products if the supply is made to a registered recipient in the UAE and the recipient intends to resell such goods or use them to manufacture any of the gold or diamond products if the below conditions are met:

  • The Recipient should be VAT Registered
  • The Registrant Recipient declares in writing the following:
  • The Gold/Gold Items will be used for resale or use to produce or manufacture any of the Gold Items
  • The Recipient is VAT registered on the date of supply.
  • The Recipient shall calculate Tax on the value of the gold/Gold Items supplied to him.

In such a scenario, the Recipient of the gold/Gold Items shall calculate the Tax on the value of the Gold/Gold Items supplied to him under Reverse Charge Mechanism and shall be responsible for all applicable Tax obligations related to the supply and for calculating the Due Tax in respect of such supplies.

 It should be noted that the special rule of Reverse Charge Mechanism by the registrant as per Cabinet Decision No. 25 of 2018 only applies to the gold/Gold Items and not to any services in relation to the same.

If the supplier supplies both Gold Items and making services, the supplier needs to consider whether the supply constitutes a single composite supply of a Gold Item or multiple supplies consisting of both goods (gold/Gold Items) and services.

Single Composite Supply:

The supply will be regarded as a single composite supply if the supplier charges a single price for the gold item including the making charges. The below conditions have to be met for the same:

The supply should consist of a principal component (Gold Item) and ancillary/incidental elements (the making service),


These components should be closely linked so that it would be impossible or unnatural to split, hence making it a single supply

There should be no separation between the price of the Gold Item and the making charges

The supply of Gold Items and the making services should be by one supplier

The above conditions have to be met for a single supply to be qualified under the Reverse Charge Mechanism along with the conditions stipulated in Cabinet Decision No.25. The supplier and the recipient are required to retain Proper documentation including Tax Invoice with the value of the single supply for the Gold Item (including the making service) stating the reverse charge mechanism was applied.

Multiple Supplies:

Unlike Single supply, if the supplier is required to charge separately for the gold items and the making services and the price of these components are charged separately the supplier has to treat each component as a separate supply and will be classified as multiple supplies. In this case, the supplier has to apply the correct VAT treatment as well.

In the case of multiple supplies, the supply of making services does not fall under the special reverse charge mechanism and only VAT related to gold items are considered under the Reverse Charge Mechanism, provided that all the conditions in Cabinet Decision 25 are fulfilled.

Therefore, a supplier has to issue a valid Tax Invoice (if he is a taxable person) for the multiple supplies and it should reflect the date of issue and original date of supply for the services provided.

If the recipient is a registrant, they can claim the input as per the general input tax recovery rules. If the supplier applied incorrect VAT treatment, the supplier should submit a voluntary disclosure.

This Article only focuses on gold and products consisting mostly of gold, which do not qualify for a zero rating. The export of Gold Items and the supply of precious investment metals do not qualify for the special reverse charge mechanism.

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