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 jewelries 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.

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

  1. kumar 26. Oct, 2016 at 4:50 pm #

    thanks for your precious view to those people who does not know about to purchase gold items .
    thank you

  2. Dipak roy 27. Nov, 2016 at 12:38 am #

    I am goldsmith but I have no certificate for this craft. I can make many gold jewellery, by hand, like earrings, necklaces, nose pins, baby rings, some types of chain, chur, wristlets etc. But we can not get the real wastage because jewellery showroom owner gives us just 5% to 6% and this 6% is divided to three people.3.5% goes to handmade karigar, 1% chhila karigor, 1% polish karigor and .5% has got the paikar. There after real truth; the 3.5% which got the handmade karigor they are finally got just 2% because 1.5% goes to jewellery workshops just for the filling and cutting which is called nehara and it’s loss from hand of hand made karigor. It’s real true in West Bengal jewellery making. We are crying today for the wastage. A huge number of karigors driving Toto for her family, We can not get the right wastage from jewellery showroom. Please do something about it. We are crying :(

    • Ajith Prasad Edassery 29. Nov, 2016 at 12:17 pm #

      Dipak Roy, Thank you very much for your comment and explanation given. It’s alarming to know that when a 50,000 rupees jewellery is made, the man who really hand-made it gets only 1000 rupees for days of hard work. I hope the looting by major Jewelers stop in the near future. There should be clear norms for handmade jewelry as well as machine cuts on how to distribute the expenses.

    • Sudha 12. Dec, 2016 at 11:23 am #

      Where are you based ? Do you take direct orders?

    • Akansh Saraf 31. Mar, 2017 at 1:53 am #

      Do you charge 6% Wastage on 916 jewellery

  3. Sunil yadav 04. Dec, 2016 at 7:19 pm #

    I have exchange the 916 gold chain and taken new chain.i need know what will actual cost which I have pay to shopkeeper .

    Cost per grm =2850 per gm
    Making cost =250 per gm
    Old chain weight=10.610
    New chain weight =15.000gm

  4. Hemant gupta 05. Dec, 2016 at 10:49 pm #

    I have purchases a gold chain recently from
    Reputed “kamal jwellers p ltd “of dehradun.
    The tag mentioned gross wt:10.59’ne wt 10.59,margin 16%’
    Rate of 22 karat quoted :2810/ gm
    Calculated as:
    10.59+10% for wastage+ 10% for making+300/gm for hallmarking+1% for vat(sales tax): something around 41000
    Owner sett led to 38800/- whereas i was emphasizing that when the tag mentions 16% why he is charging 20%( 10%+10% for wastage & making)
    Further i paid ?38800 by cheque& he gave me receipt in the shape of order form with rate 2810/gm, for 13.808 without mention of article or its description or photo etc.
    How should i proceed before taking delivey ?

  5. Hemant gupta 05. Dec, 2016 at 10:52 pm #

    Your article is very useful.
    I have come across with another loot in the name of hallmarking charges in addition to wastage charge10%+making charge10% that too @ 300/gm ???

    • Mayur 02. Mar, 2017 at 10:19 am #

      Sir, it’s common number of making charges u have to face 450 to 500 in metro cities. Thank him for less charges that is not a loot.

  6. prasoon kumar 10. Dec, 2016 at 11:59 pm #

    Thank you for your nice coments but the local jewelers take less charges with comparison of branded jewelers.abot x10 more charged by branded

  7. prasoon kumar 11. Dec, 2016 at 12:03 am #


  8. Sahil 20. Dec, 2016 at 9:28 pm #

    I have purchased 23 karat of gold of weight 115 gram when rate of gold was Ra 2750 per gram. Gold Smith added 13 gram KDM polish in it and finally counted 128 gram gold. He made my bill of Rs 367000/-. Please advise me

  9. Archana M 22. Dec, 2016 at 8:25 am #

    My question is : who will pay the hallmark charges? Jeweller or a buyer?pl clarify. Thanks

  10. Saptaki Das 23. Dec, 2016 at 11:45 am #

    I have a question regarding gold price –
    Why 24 carat Gold rate (suppose Rs. 30K) is not equivalent to 91.6? (i.e. Rs. 27480) for 22 carat, in Gold market?

    Example – On 23/12/2016 price of 24 carat gold was Rs.28855.61 per 10 gram in Mumbai, but price of 22 carat gold was Rs 26980 instead of 26431.73 ( 28855.61 * 91.6?).

  11. Amita gupta 28. Dec, 2016 at 2:07 pm #

    I have exchanged my sister’s bangles which were weighing 51.450 g n the carat was21.900 after melting. I perchaged a chain weighing52.500g.they charged 1 lakh73000. which containing 31000 making charges . don’t u think the making charges r too high

  12. Raghunath 05. Jan, 2017 at 8:59 pm #

    I bought one Diamond bangle (1 piece) from Mysore having weight 11.730 gms which having gold charges 25500 & diamond charges 19000. they charged me 11500 as wastege charges. Could you plz suggest, is it fair enough to charge 11500 as wastege charges or they charged me more. Kindly suggest.

  13. Gaurav kumar 27. Jan, 2017 at 2:42 pm #

    I want know about recently making charge and wastage charge for gold jewellery.

  14. Syed nadeem Ahmed 17. Feb, 2017 at 1:00 pm #

    Nice information thank you so much

  15. Madhu 28. Feb, 2017 at 1:42 pm #

    Good day..
    I bought a bracelet in Malabar gold in Saudi Arabia. They have take 400 ? /Gram as making charges. Is that reasonable price for bracelet. Or high. They saying that according to item the making charges will vary. Collected only making charges.. no other than wastage charges taken.. I think so..
    Did I pay excess…?

  16. Madhu 28. Feb, 2017 at 1:50 pm #

    I wanna know regarding the tags attached to ornaments in jewellery shops. How they define..? Their will be item weight. Other than weight what will be present on tag.. like making charges will present on each item in the form of code..? Pls clear my doubt.
    Your reply is appreciable..

  17. DINESH BABU R 01. Mar, 2017 at 9:40 pm #

    I bought 28 grams of 916 kdm Kolkatta design. What will be wastages for 28grams of gold?

  18. Zahid Gani 02. Mar, 2017 at 1:15 am #

    I am going to pyrchase 50 gram 22k gold for neckless and when i ask showroom customer they told me
    current 22k rate + 28% making+1% vat=your amount.please suggest this is very high valye rate.

  19. mayur 02. Mar, 2017 at 10:14 am #

    dear sir, while other business have profit margin of 30% to 40% like hotel,cloth etc….then what is wrong if a gold smith earns 7% to 10%. when you purchase clothes of 10,000 tell me can u resell them in cloth stores??? what is the amount you will get for those clothes after one year….do cloth or mobile shop keepers secure u that you will get at least 60% return money…off course not….but we gold smith can give u 9160 rupees for 10000 after 1 year or 10 year or more too….think and talk sir.

  20. k.eswar rao 18. Mar, 2017 at 9:17 pm #

    Good advice

  21. Ashok 19. Mar, 2017 at 11:26 pm #

    Thanks ,, I gain a precious information for gold

  22. Sravani 26. Mar, 2017 at 10:46 pm #

    Why there r taking wastage charges more. suppose for 10 gms the jewellery shop may charge 1gms of amount of wastage may be more… How to eradicate this system is there is a way plz send….

  23. Jayasankar 06. Apr, 2017 at 10:04 pm #

    Problem is Central govt is unable to control the loot by the Jewelers. If Central govt imposes any strict rules on this immediately the Entire north Indian Jewelry community goes for agitation. Loot is going on for the past 50 Years. Let us al write to PM and FM to bring in rule to curb this loot soon.

    Let all people stand united and fight against these Jewelry shop Owners.

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