Gold Jewellery Buying Tips: Wastage Charges, Making Charges, VA, Karat, 916 and more…

9 Aug



Planning to buy some Gold jewellery in India and confused about how the whole thing works? Well, I was equally puzzled by all those terminologies and promises that you get to hear in Jewellery shop commercials until I decided to dig out some information.

So here’re some tips and education that might help you in the future.

What is Karat, 916, BIS Hallmark etc?

Karat (NOT Carat) is a measure of the purity of gold. 24 carat is considered pure gold.

Since pure gold is too soft (and hence would easily bend) to make any jewellery out of it, there has to be certain other metals such as copper, silver, cadmium etc added to make it strong, shine and with the desired shade. Based on how much extra metals are added, the Karat value of the gold reduces to 22Kt, 18Kt, 14Kt or even 10Kt.

For example, 18K gold is 75% pure gold (i.e. 18/24) where as 14K gold has only 58% real gold in it.

In India, 22K gold is considered the most valuable for jewelleries and hence it has more resale value as well. 22Kt gold jewellery means it has 22/24 percent pure gold in it or in other words 91.6% purity.

And this is what is called 916 gold (symbolizes 91.6%).

BIS Hallmark Symbol

BIS Hallmark Symbol

In order to make sure that the jewellers actually sell 91.6% pure gold (when they claim to sell 22Kt gold), the Bureau of Indian Standards (BIS) made it mandatory to emboss a hallmark on all standardized gold jewellery. And such a jewellery is known as a BIS Hallmark jewellery. Before this standardization, many jewellers and goldsmiths used to cheat people with below 22Kt gold while they claimed to sell good quality 22K gold. I figured this out while selling some old gold jewellery recently.

[BIS Hallmark is NOT just for 22Kt gold. You may take a look at the BIS site for all BIS components]

Making Charges, Gold Wastage charges etc

As I mentioned earlier, there has to be certain metals added to pure gold to make it tough and good enough to make jewellery. This is the first level of added cost to the making process followed by the actual making charges to convert the gold bars or blocks into beautiful jewellery patterns.

The making charges (‘Panikkooli’ for Malayali friends) is the cost of converting raw gold into jewellery. This is usually expressed in Rupees per gram of gold. In most cases, the making charges per gram of gold vary from 25 to 35 rupees. Compared to the price of gold today, this is a negligible number.

However, there is another scary number called the ‘wastage charges’ (‘Panikkuravu’ as Keralites call it). In the good old times, the goldsmiths used to make gold jewellery by melting gold, cutting and shaping it into tiny pieces and join them together to make great handmade gold jewellery. In this process they ‘claimed’ that certain quantity of gold go wasted though these goldsmiths are actually smart enough to collect or retrieve most of the gold without wasting any. Nowadays, the gold ornaments are made in advanced machines and nothing really go wasted. However, this tradition of calculating ‘wastage’ continues and this is expressed in terms of ‘percentage’and they charge that to the customers.

The amount charged to the customers for the ‘wastage’ caused is known as the ‘wastage charges’. It’s quite ridiculous that there’s no norm for this wastage charge component and that’s exactly where your jeweller cheats you. The wastage charges typically vary from 10% to 18% in most shops while it’s quite possible to have it as high as 20% or 24% or even as low as 8%. Unfortunately, nobody knows why certain ornaments has to have more wastage than some others as claimed by the jeweller.

Hence the actual cost burden on you while purchasing gold jewellery is:

Actual cost of gold as per the day’s rate + Wastage charges + Making Charges + VAT if any. In addition, if your jewellery has any precious stones, that cost will be added up as well.

Cost of Gold Jewellery = Making Charges + Wastage Charges + Cost of Stones, if any + VAT

For example, assume that the gold rate is at Rs.2500/- per gram for 22 Karat gold. When you buy a 10 gram gold chain with the making charges at 35 rupees per gram and wastage charges at 12%, the following will be the calculation to arrive at the final price:

(1) Cost of gold alone = 10 * 2500 = 25,000/-

(2) Making charges = 10 * 35 = 350/-

(3) Wastage charges = 12 * 25,000 / 100 = 3,000/-

The total cost before VAT = 28,350/-

If the VAT is at 1% that becomes 28,633.50/-

Recently the jewellers have started representing the Wastage Charges and Making charges together as VA or ‘Value Addition’.

Gold Jewellery buying tips for Indians

As a smart buyer, you may keep the following things in mind when you deal with jewellery shops.

  • First, if you are exchanging gold (selling old ornaments and buying new) make sure that you are getting the full price of what you are selling. i.e. As long as you are selling 22K gold, the shop may not reduce any price but give you the actual market price of the 22K gold by its weight. There are some jewellers who charge melting charges, handling charges or whatever they may call it but never ever fall into that trap
  • Each and every piece has to be weighed separately and tested for purity using the electronic purity tester while selling. i.e. if you have a pair of ear rings, test them separately
  • Ask for the current gold price on your purchase day and their standard making charges before commencing your shopping
  • Check for the BIS hallmark on the inner or back side of each of the pieces you are buying
  • Ask for the ‘wastage charges’ for each of the pieces that you are picking and be prepared for the negotiation
  • You may start by asking the ‘BEST wastage charge’ as per the salesman. Negotiate with him and tell him that you are serious about the purchase if he’s forthcoming in terms of a reduced rate. He will mostly give one percent less. Take it to the store manager or supervisor at the next level to get 2-3% negotiation done. You WILL definitely get 2-3% discount if you are making bigger purchases. If you are gone there just to pick a little 2gm earring or so, you better not negotiate much. But if you are on wedding or engagement shopping, you may save a lot by negotiating


Further tips:
There may be some sales people who may try to belittle you on your miserliness and even might raise their voice. You may remind such people that you know this business and it’s your money that is at stake. Further, you may ask them why there’s no norm for this so-called wastage charges (Hopefully at some point the government will normalize this as well).

Most jewellers may offer you a discount of 40 or 50 rupees per gram on the prevailing rate as if they are doing you a great favour. Please note that your REAL saving comes from the wastage charge negotiation. The ’special discount valid only for today’, or ‘pick a chit and get your lucky discount’ etc are the gimmicks that they play to preempt further negotiation. Don’t fall for those tricks.

You may advise your respective wives to stop exchanging jewellery too often. Because, every time you exchange, all those value addition charges come into play and you lose a lot of money.

If investment is your goal, avoid buying jewellery but go for gold coins or even Exchange Traded Funds on Gold (ETF Gold Funds).

That’s pretty much for now. I just thought of jotting down these points after coming back from a minor purchase at Chemmanur Jewellers – not that I was hugely successful in negotiating this time. But I have certainly seen my relatives, in-laws, friends etc negotiating big time and making a huge difference in the final bill.

151 Responses to “Gold Jewellery Buying Tips: Wastage Charges, Making Charges, VA, Karat, 916 and more…”

  1. satyendra 11. May, 2014 at 12:52 pm #

    hi i bought jewellery for my wedding but i was not aware about all these calculation of gold purity and price.so the jewellers cheated me by giving 18 kt jewellery instead of 22 kt and charge me for that of 22 kt. please suggest me what i should do?should i take legal action? if yes how? please help.regards

    • Ajith Prasad Edassery 12. May, 2014 at 9:45 pm #

      Well, if you have the bill that mentions the rate and purity of the gold purchased, you may be able to take some legal actions. If not, what if the jeweler argues that he intended to sell you 18ct? However, I am not completely aware of how the legal route can be taken.

    • Laxmi Prasad 19. May, 2014 at 8:54 pm #

      Do you have receipt for that purchase? if yes, you can complain at the consumer helpline 1800-180-4566. They will help you out.

  2. Rajshri 12. May, 2014 at 10:09 pm #

    Thanks for advice.Regards bro. Rajshri.

  3. Mohan 25. May, 2014 at 4:48 pm #

    Today i have purchased jewellry from Tanishq showroom. They have charged 25% wastage. Since all are employees in Tanishq they say co policy. If TATA company does business this way I wonder how others fleece. For obvious reasons there are no regulators. Let all make hay!!!!!!!

    • Rohit 23. Jun, 2014 at 11:30 am #

      My friend runs a large online jewelry store (among top 3 in India). He told me that actual wastage charges are about 3%, maximum 5% of the value of the gold.

      Titan Industries is the most profitable company for Tata Group just because they charge very high making charges, like you have rightly mentioned. Also, given the ambiance of the store, we also do not negotiate properly with the Tata employees, because they will use ‘company policy’ to justify low discounts.

      My friend also told me that for large purchases like weddings, no one goes to Tanishq, but prefer the trusted jewellery store near the house where people have been going for generations. There is better scope for negotiation there compared to corporate houses.

      • rahul 31. Aug, 2014 at 11:59 pm #

        sir , @rohit u r totally wrong, 3% or 5% no worker will work, bcoz to make any jewellery , it goes under many procedures , like 1st step : melting, 2nd step : mixing right amount of other melts, 3rd step: cutting, ( which normally made by hands , no machine can perform that work, 4th step: formation of design , 5th step polishing , almost 3 to 5 members work on single item, its not that much easy .. if u compare 3 to 5% wastage , than no work can work 100rs ,… 18% is normal, not more than that

  4. sakthivel 31. May, 2014 at 11:52 am #

    thanks a lot i happened to know more

  5. ami 07. Jun, 2014 at 12:38 am #

    Hello sir… my parents recently bought gold frm a local shop. The owner charged rs 350 per gm as making charges, rs 60 per gm as making charge 100%refundable (as it is mentioned in the bill) and hallmarking charge @rs 80 per gm.. plz advise whether it is possible ???

    • Ajith Prasad Edassery 12. Jun, 2014 at 11:33 am #

      Never heard of any ‘refundable making charge’ so far. But could you confirm if any wastage charges added further? or was it 350+80 in total per gram and no further component (wastage etc)?

      Hallmarking charges vary from jeweler to jeweler for no reason although the government has a fixed rate and license fee for the same.

  6. prem singh 17. Jun, 2014 at 11:30 pm #

    Sir.what is the return rate of 22kdm jwellery.
    The shopkeeper told me that I ( any shop ) will return jwellery
    At the rate of100% of the crruent price
    Plz tell me it is true

    • Ajith Prasad Edassery 18. Jun, 2014 at 1:00 pm #

      It’s supposed to be the case although some fraud jewelers or those who don’t want to buy gold back won’t give 100% of the market price. The most genuine ones will give you 100% of the day’s market price, some may deduct just Rs.5 or 10 per gram towards handling but that’s it. If your jeweler is not willing to give you 100% of the day’s price (minus say 5 or 10 rupees in worst case), go to another jeweler.

  7. sandy 18. Jun, 2014 at 12:52 am #

    Hi ajit
    Today I bought a gold ring. It’s 916 KDM. Jeweller told me that the ring is 92% gold and its a BIS hallmark jewellery.
    When I return home I tried to find out the BIS hallmark on the ring. I found that inside of the ring B I S is engrossed. So is that means its an Original BIS hallmark jewellery? ?

    Please help me in this regard.
    Thanks Sandy.

    • Ajith Prasad Edassery 18. Jun, 2014 at 12:57 pm #

      Original hall mark jewelery should have the following 5 tiny marks engraved into the same (for rings, bangles etc look for the inner side)

      1. BIS logo – the triangle that is present on this blog post
      2. The number ‘916′ indicating 22kt BIS gold
      3. Hallmarking licensee or center’s emblem or name
      4. Jeweler’s identification mark
      5. Year of manufacturing represented by an alphabet (e.g. A = 2000, B=2001,… O=2014,…)

      Not all 916 jewelery that I bought contain the 5th one though (or I don’t know where to locate it). Rest of the marks are present for me. You may have to check for these engravings perhaps using a hand lens to help with reading the same (usually visible with normal vision)

  8. Anijeeya 25. Jun, 2014 at 2:52 pm #

    Thanks for all i got a good advice after reading all your msg ’s.i want to bye mangalsuthra for me which shop is good for that plz do msg me in Mysore. Please do help me out

  9. ashima 21. Jul, 2014 at 8:13 am #

    Hi,

    I am confused as to, whether to invest in actual gold or gold etf or e-gold?…also, kindly tell me, while buying jewellery does the price differ as per the current rate of gold or is it fixed?

    • Ajith Prasad Edassery 21. Jul, 2014 at 6:16 pm #

      I personally prefer ETF as I am a fan of investments in DMAT form and it’s very liquid investment. It’s safer that way. ETF price movements are very close to the gold market rates and hence no loss of money. You have to just make sure that you pick an ETF that has decent daily volume on the exchange.

      The only reason one would go for gold coins or bars (24 kt) is to actually convert them into jewelery for a predictable future use (e.g. daughter’s marriage etc). In all other cases, please be responsible and save the country by not buying and storing a lot of gold in physical form.

      As for your other question, when you buy jewelery you have to pay as per the gold rate on that day.

  10. Rajeev 23. Jul, 2014 at 8:45 am #

    My gold bill has 18% va and p.va mentioned 13%. This 18% is making charge? Could you please explain?
    Thanks in advance.

  11. Ajith Prasad Edassery 29. Jul, 2014 at 9:21 pm #

    I shall reply to your email address as this post is meant only for Gold related queries.

  12. Nikhil 30. Jul, 2014 at 3:14 pm #

    Hi Ajith,

    I just sell 35grm 22 krt gold and the jweller buy it at 26500 on 27.07.2014 as per him 26500 is buy back rate. the gold was tested in testing agency and it is found 22 krt but there was no halmark was there on my gold. and i purchased new gold on which he levied rate of Rs. 2800 per gram. was it correct or he cheated me? Please help.

    • Ajith Prasad Edassery 30. Jul, 2014 at 7:47 pm #

      Firstly, good that you got a good price for what you sold. The market price of 22kt gold was somewhere around 2650/gm this week. However, the buy price of 2800 per gram is not good. Usually, they charge at the same gold rate of the day during exchange buy as well. But then, if you got a good deal on VA then it may still be a good deal. So please check how much more you paid on top of the gold price in terms of value addition.

    • DHEERAJ BHOLA 27. Sep, 2014 at 5:31 pm #

      Just check 2650gold+150rps labour per gm= 2800
      Then it is fine.some jewellers combine the price of gold and labour charges

  13. Thirunavukkarasu 31. Jul, 2014 at 5:18 pm #

    HI Ajith,
    I have physical gold ornaments which i am planning to sell for an urgent need of money.. I have booked a ind house, for that i need this money.

    Please advice what is the rate that i can expect as cash if i sell today (Rate in market 22ct Rs.2650).. I have around 240Grms which i am about to encash.. In that most of the ornaments were having 916 and few were not 916.

    What would be best sell price for 916 and then non-916 gold ornaments.

    • Ajith Prasad Edassery 04. Aug, 2014 at 12:58 pm #

      Best price is always the current market price of gold in your city. Some might give you 50 odd rupees less. Best thing to do is to take it back to the jeweler from whom you bought it.

      • Thirunavukkarasu 04. Aug, 2014 at 7:06 pm #

        Thank you.. Ajith

  14. Thirunavukkarasu 31. Jul, 2014 at 5:19 pm #

    If you know any of the gold buyer that offer best price more or less equal to current market price please let me know..

    Regards
    -Thiru

  15. seleena 10. Aug, 2014 at 9:28 pm #

    Hi,
    I am thinking of selling 22.480g of 916 Bis gold. How much Rs can we get? The Shop Keeper told that around 600mg will be deducted from total weight while calculating the rate of our gold. Also they Will charge Rs20 per each gram… Is this argue is correct Or wrong. Please give a quick reply

    • Ajith Prasad Edassery 11. Aug, 2014 at 10:51 am #

      Most people deduct 20 to 50 rupees per gram although if you take it to where you bought it from, they may not deduct anything.

      As per your jeweler’s estimate, you are totally losing about ~2000 rupees (less than one gram price). It’s probably not too bad, given that you need money urgently. Otherwise, wait for a better option where they don’t deduct 600mg cost as wastage (because you have 916 BIS marked gold)

    • DHEERAJ BHOLA 27. Sep, 2014 at 5:21 pm #

      0.600mgs is ok because he will clean the jewellery and put it in counter again for resale and he takes 3% profit. But i dont understand 450 rps for what.it is extra.i know because i am jeweller doing this bussiness for more then 20 years

  16. sarita 16. Aug, 2014 at 5:04 pm #

    Hello sir
    I Bought a necklace at Tanisqh of 19,6 grams 22k gold , when the price was 27,400/- for 10 grams , they charged 23 % of wastage to me, i am almost upset as i my saving went in that stupid purchase,suggest me where i should raise this issue, or to whose knowledge i should bring this

    • Ajith Prasad Edassery 17. Aug, 2014 at 10:22 am #

      Tanishq is always expensive – may be because their designs are unique and stylish. There are also other jewellers who charge 20 or 25% as VA depending on how complicated is the design. Hence, I cannot comment whether it’s a good or bad deal.

      If it’s a very basic design, then probably it’s expensive as other jewellers would have charged 10 or 12% for basic designs.

    • DHEERAJ BHOLA 27. Sep, 2014 at 5:09 pm #

      Hello dear always keep in mind gold is for saving/investment for future but the fact is you are making very fruitfull present of tanishq by paying your hard money in more wastage charges just because of their brand name.you dont make profit instead of loss of 13% by paying it more wastage charges.

  17. Shalini 20. Aug, 2014 at 10:26 am #

    Hi Ajith,

    I want to sell my old gold and buy new one, could you please suggest which is the best place to go. Some say its good to exchange in Shubh Jewellers as there is no making and wastage charges.
    Please suggest me where to exchange for good deal.

  18. Kannika 22. Aug, 2014 at 12:10 pm #

    Hi Ajith,

    I want purchase one neck chain for 25 grm today. Let me know the cost of purchase including wastage making charges and VAT, as per today’s gold rate.

  19. SHAHID 28. Aug, 2014 at 6:41 pm #

    PNG in Pune was quoting Rs.27700/- on 24th Aug. for 22k jewellry whereas the rate as per websites on that day was Rs.26700. Want to know why they charge more? Plus Wastage for gold bangles they are charging 16%. Is it correct?

    • Ajith Prasad Edassery 01. Sep, 2014 at 12:01 pm #

      Ideally, it should be at the day’s gold rate. As for wastage, depends on how complicated the design is in case of hand made jewelery. For machine cut, 16% may be too high.

      • DHEERAJ BHOLA 27. Sep, 2014 at 4:51 pm #

        Yes you are right.i know that

  20. Dr.Anurag Srivastava 01. Sep, 2014 at 1:49 am #

    Sir,today I purchase two gold bangles 43.8 grms. Hallmark 750,means it is 18 karat. Its price around 113000,and he said that he has given me discount of 15000 rd as he is my friend..I think I m cheated. Can u please help me…as I don’t know details..

    • Ajith Prasad Edassery 01. Sep, 2014 at 11:55 am #

      Sorry, I have no idea about 18k rates and applicable making charges. Personally, I never buy 18k gold.

  21. sandhya 02. Sep, 2014 at 3:48 pm #

    HI, I Bought a bracelet yesterday from one of the main jewellery here in Dubai . yesterday’s gold rate was aed 147.50 n gold weight was 3.240 gram…n they charged me 560 dhs dat means 82 dhs extra as making charge or any other charges related to that.can you please let me know whether they cheated me in calculation or not.

  22. Chitra 03. Sep, 2014 at 9:40 pm #

    Sir. Last i ordered to make a antique model chain that weight is 24 Gram .they told to make a chain to.use vax inside.and wesitage 19% In future its valuble

  23. Ramya 04. Sep, 2014 at 12:13 pm #

    Sir,

    I am from coimbatore. I bought all the jewellery in Joy alukkas. But here all the people are saying they are providing kerala gold. My friends are told Kumaran thangamaligai is the best show room. I am very confusing they cheated me. All my golds are 22 carat. Which is the best shop. Pls advice me. I am going to buy gold coin tomorrow.

  24. Nizar 05. Sep, 2014 at 3:48 pm #

    Hai,
    Since the tax for gold purchase is low in Mumbai compared to Kerala, is it advisable to buy from Mumbai or any other states from India??

  25. Rupali pasad 07. Sep, 2014 at 10:18 pm #

    pls suggest me on following
    i had purchase a kdm gold chain 5 Year back and when now i am sellig it in same shop then he deduct 15 % wt of totol gold and giving the price. I want to know that it is right or wrong

  26. mehul 08. Sep, 2014 at 9:23 am #

    HI ajeet I purchased 2.49gm of earing.
    Where the store charge me 2730 per gm 22 k gold.and 2770 was price for 24k
    .
    I think they shpuld charge 2770*92/100=2548 per gm

    They why he is charging 2730 for 22 k means 92% pure gold.abd also cgarged 747 making and 1% vat.

    Ifvi calculate he us taking 99% gold charges for a 22k means 92% pure why he us taking 7 % more rate per gm.
    I think all over india they sell gold like this.

    Any idea?

  27. ARIEF 21. Sep, 2014 at 9:44 pm #

    My Question is
    How can we believe the wastage is correct what jeweller says??. I purchased golds for my wedding, they charges up to 25% of wastage, For bangles they charged 15% .I feel in wastage they are cheating us. I can`t able to compromise, i fight with the jeweller as WHY I WANT TO PAY FOR WASTAGE , WHAT I AM NOT GETTING???. But no use.
    Also why i want to pay Tax for that wastage??
    Also i heard actual wastage will be only 5% , The person who is making the ornaments is getting that wastage once in a year ( they wont sweep their room, once in a year while they sweeeps they get more than 5 to 10 Lakhs in wastage). This is a cheating works..

    KIndly give me solutions

  28. Sharada 22. Sep, 2014 at 10:51 am #

    Hi Ajit,

    Thanks so much for taking time out and providing the detailed insights, i bought jewelry last week, once jeweler charged me 16% making , wastage and the other 22% and without awareness i was not able to do a good negotiation, it will definitely help in my next purchases for sure.

    Regards,
    Sharada

  29. Tiya 24. Sep, 2014 at 11:29 pm #

    i bought a gold neckpiece where there is a stamp 23 carat 85
    what does this mean

  30. Ramana Murty Malla 29. Sep, 2014 at 5:53 pm #

    I want to buy hall mark 22 ct gold ear rings for my daughter at TBZ given gold prices have fallen recently.They are quoting 600 to 650 per gram towards making charges. They say temple jewellary making charges are high. Do you think these very high charges are reasonable.

  31. pawsah 30. Sep, 2014 at 1:12 am #

    1)how can i avoid wastage % charges from gold shop.
    2)what are the ingredients present in 916 gold ,plz mention with there %.
    3)which dept gives license to run gold shop.
    4) is there any govt norms and rules sell OR bye gold from gold shop.

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