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

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.

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  1. 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 :(

    • 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.

  2. 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
    Vat=1.2%
    Old chain weight=10.610
    New chain weight =15.000gm

  3. 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 ?

  4. 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 ???

    • 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.

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

  6. 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

  7. 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?).

  8. 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

  9. Hi,
    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.

  10. 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…?

  11. 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..
    Thankyou.

  12. Hi
    I am going to pyrchase 50 gram 22k gold for neckless and bangles.today. 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.

  13. 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.

  14. 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….

  15. 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.

    • Jayashankar,

      Lets to a change petition for the same , government is hard bent on addressing black money but it cant put a blind eye to black money mine, which is indian jewellery trade.
      Everyday millions of people are being conned, my reservation is why the government even allows confusing karat and .917 type markings why cant we have a definite 90%, 75% gold purity written on the recipts.
      Lets nail this.

  16. Sir what should the actual making charges
    i have taken a pendent 22 karat of 1.5 gm with 5.5 ratti manik plz calculate and tell what its cost should be

  17. Yesterday I purchased ear tops for my little daughter. I rarely purchase gold.

    Gold rate on 29.4.17 ,916, 22k
    28890
    Wt .69 gm (us me zerkin bhi lage huey the)
    Cost== 2000
    Taking charges = 400
    Hall mark charge = 250
    Vat===26
    Cost to me 2676

    I m worried and felt cheated.

    I have got the bill

    Pl advise.

  18. The whole indian jewellery industry is a con market at best, there is no professionalism whatsoever.

    I bought a (supposedly) 22 karat 6 gram ring at Lucknow ,vrindavan jwellers.
    The price was going gold price + making charges 700 rs per gram.

    So what I had was 6gm of 22karat gold ring at VA of 4200 rupees.

    Now I decided to get the ring remade so I went to the same jeweller and this is what I was offered –

    The gold was annouced as having 72% which is less than 18karat, on asking why 22karat is being taken as 18 karat the answer was there is ‘tanka’ , the joint which makes the total gold value lesser. But didn’t I pay for 22karat by weight ?
    So my 6gram ring was valued as 4.2 gm 24karat ring , making charges would be 750 rs per gram and resulting ring would be 4.2 gm in 22 karat (supposedly)

    But infact I will be given 18karat 4.2 gram ring , that means in every making cycle im loosing 30% gold on top of making charges.

    Shouldn’t my gold stay in orginal value when making is only changing the design ? But seems indian jewellers have devised a short cut to riches.

    As a learning I have decreed at home thst going forward we are not getting any gold item made in India full stop.

  19. Is there any chance to make good of this wastage percentage/cost as it is retreavable from the machine/factory…?

  20. why excise and vat applied on making charges or labor charges is there any notification or else please help regarding this

  21. Dear Ajit,

    I am planning to purchase 24k gold 20 grams in Saudi Arabia. Per gram rate was 158 SAR/gram. Let me know how much I have to pay certification charges.

    Thanks
    Mani

  22. i have purchase the ear rings from Khazana showroom.
    at that time gold price was 2660 per gm and
    they have charged Rs 4282 As a wastage for 7.690 net wt grams.
    Iam still confused why they are charging this much of amount

    can any one suggest on this

  23. Sir, I tried to change my mother Nonthadu , old exchange and new then so I negotiate with one known gold seller..But i didn’t know about gold and purchase please help me..
    Description : old gold : 82.84 concentration % and wt : 20.540 and carat :19.9
    For new : 36 grams + 2.5 grams (wastage charge) = 38.500 grams..

    And the costed my old objects as like
    20.540*82% = 92. Then old gold 18.300

    38.500 – 18.300 = 20.200(cost for ne)*2740(per gram cost) =?55,350
    Is this sufficient cost…

  24. Hello,
    I’m in Bahrain, Recently i bought Gold 22 k earing 6.5 Gram.
    I was not knowing about All this gold terminologies.
    In the name of ‘ Making Charge’ i have been looted by Malabar’s salesmen, he has charged 3 BD (510 rs/ Gram)
    I must have read your blog earlier. :(

  25. Yes it’s true & I know all this things but there are no option because people not so little about that & if I have knowledge & raise my voice nobody supports me there are no govt restriction on gold jewellery because of this there are problem

  26. I have exchanged my old chain n purchased new one. The gold smith charged Rs.400 per gram. Is it judtify. Pl.let me know.

  27. Can we mention wastage and macking charges seprate in only estimation paper is it is a crime if we mention

  28. sir if I want to purchase a chain of 10grams how many rupees cost for that and what will be purity of gold please reply

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