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.

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

  1. Shankar 25. Nov, 2014 at 4:54 pm #

    Most of the Jewelers in Tamil Nadu especially Chennai sell only 18 Carat Gold , but they claim it 22 Carat Gold. Only two Jewelers sell 22 Carat jewels. Jewel’s are designed and made in Coimbatore. They say Hall mark or Cadmium. Actually wastage is only Max Max 1.5% in gold. IN CHENNAI ONLY Kirtilal Kalidas and Mehta sell 22 CARAT GOLD JEWELS Others are only 18 Carat.
    Central govt must bring in stringent Punishment to Gold Jewelers who cheat public. Unless it is done Public will be continued be cheated. and Big Jewelers in Chennai continue to make big money.

    • iyer 30. Nov, 2014 at 12:25 am #

      Hi Shankar…
      You mean to say reputed shops like GRT sells 18k or is it they randomly have it stocked in their inventory? But their bill says 22k… How should I trust?

      • Ajith Prasad Edassery 02. Dec, 2014 at 2:54 pm #

        I do not buy Shankar’s theory completely. However, when something was sold as 22kt in the past (i.e. when BIS mark wasn’t in effect), it used to contain less than 22kt gold in many cases but not as bad as 18kt in my experience. When I sold some old jewelery in 2000, it varied from 20 to 22kt as shown by the machine.

        • Shankar 21. Dec, 2014 at 8:06 pm #

          Most of Jewels are made in Coimbatore only. 95% of Jewelry sell only 18 Carrot gold. I know certain Very Big Jeweller s in Chennai who are in T.Nagar , and how they cheat people. I have experienced that. when i went to mumbai for work and wanted to buy a Jewel and gave my chain for Exchange and they told me it is 18 Carrot Gold,I was taken aback. I purchased this from a Very big T.Nagar Jewelry shop known for his name. from that time on wards i tell my friends and Relatives not to go to that shop.

  2. Anonymous 02. Dec, 2014 at 2:32 pm #

    Very helpful bro. A very detailed and decent review.
    Thanks bro

  3. Kavitha 05. Dec, 2014 at 6:25 pm #

    Thank you for the information you have given regarding gold purchase it was really helpful I will keep all your tips in my mind when I purchase gold
    Thanks again

  4. god 17. Dec, 2014 at 10:38 am #

    Very usefull information.helpful to everyone.

  5. Shankar 14. Jan, 2015 at 8:43 pm #

    Regarding Wastage on Gold , Max wastage is just 0.75%, in rare cases it is 1% only not more than this. This information is given by a known person to me in MMTC. 50% people charge 10-12% wastage, some do not. But then how they make Profit, simple -by selling 18 Carrot Gold.2 Years back MMTC used to sell Jewel’s, but now they had stopped it,. they sell only Gold Coin and Silver articles. Silver Articles are supplied from ND to Jewelers in South India. In Mumbai Gold jewels are either 20 Carrot or 22 Carrot, Most Jewelers Disclose it. All Hall Mark are just an Eye wash as far as TN shops are Concerned..

    • Nishant 23. Mar, 2015 at 9:26 pm #

      iam not fully satisfied by u because not all the jewellery shop make there jewellery by there own the jewellery are made by karigar or the jewellery maker and they take wastage charges and and wastage charges are really depend above different kind of jewellery the jewellery have to pass many level before they are ready for sell like cutting,polishing, setting of stone, and many several charges and there are a fixed wastage charges are for them which a jeweller or a jewellery shop owner have to borrow not all the wastage they take alone there are many several charges.By your thought i think you are completely taking one side and That’s not fair

  6. jayshree 10. Feb, 2015 at 2:34 pm #

    thank you for giving such nice information . i have one quetion some seller apply making charges + rodium charges extra is it right please keep aware for this

  7. goldmax 19. Feb, 2015 at 5:23 am #

    Hi Ajith, An eye opener info very crisp.

  8. THIRU 21. Feb, 2015 at 1:49 am #

    Is that worth buying gold in online store? There are many brands they are showing like rsbl, golden leaf, e-geethanjali, zee gold, on gold… Like that they are telling its 999 purity and some other telling 995 with BIS certificate… Do u have any idea about for buying this kind of gold? When we sell these gold back in any ordinary jewellery shop does its value be faded or low comparing to offline store?

  9. subi 24. Feb, 2015 at 8:05 pm #

    good information

  10. smahalakshmi 02. Mar, 2015 at 5:51 am #

    Ajith sir
    This is really very useful tips. Your points were very clear and simple. Thank you.

  11. shivkumar 20. Mar, 2015 at 8:11 pm #

    Good information for customers,


  12. Nishant 23. Mar, 2015 at 9:32 pm #

    You are talking one sided only . what
    about the huge investment a jeweler per today’s tradition a jeweler
    have to keep huge stock of every type of
    jewellery in his shop ranging from finger
    rings to big wedding necklace sets after
    showing so many designs still customer
    is not satisfied and asks for more
    variety.even in a small to medium shop
    a jeweler has to keep minimum 5 kg
    stocks to display a decent variety. as
    per today’s rate 5 kg comes to 1.4
    crores ,include in that the cost of shop
    that comes to a minimum 50 lakhs then
    comes furniture minimum 10 lakhs .the
    total set up goes around 2 crores. even
    if we take interest as per bank that is
    8% yearly he shud get 16 lacs yearly or
    1.33 lakhs monthly.considering todays
    competitive market many jewellers dont
    earn bank interest also.

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