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.

123 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.

  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.

      • ashima 29. Jul, 2014 at 4:40 pm #

        Hi ajith,

        Thanks for such an easy an informative reply…u do make sense…tell me..which gold etf can i invest in…if i wanna go for a long term investment?…

        I m curious..when u said not buyin n storin gold could actually save the country…how?:)

  10. ashima 21. Jul, 2014 at 10:18 am #

    what would b better…buying gold coins…or gold etf or e-gold?….also is the gold jewellery sold as per the day’s price or the price is fixed?

  11. 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.

  12. ashima 29. Jul, 2014 at 4:46 pm #

    Hi…

    Please tell me..is the interest paid on ppf account the same no matter which bank one chooses…

    i m completely new in the investment field…i wanna save for a comfortable and dignified retirement life…i m not very ambitious…but my main aim is to have financial security and hopefully when i retire, i should have the freedom to travel all over the world and yet be assured i would have enough to last for a lifetime. Ajith..could u suggest the funds …the approach i could take if i wanna invest for a long term period…i m 26…i can invest for upto 20 or 25 years…

    Thanks

    • 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.

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