Jewellery Buying Tips
Planning to buy some Gold jewellery in India and confused about how the whole thing works?
So here’re some tips and education that might help you.
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, 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%).
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.
[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 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’. 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 showrooms cheat you. The wastage charges typically vary from 10% to 18% in most showrooms while it’s quite possible to have it as high as 20% or 48% or even as low as 8%.
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
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 GST = 28,350/-
Recently the showrooms 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 showrooms.
- 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 showroom may not reduce any price but give you the actual market price of the 22K gold by its weight. There are some showrooms 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.
- 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 showrooms 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.
Bottom Line :-
1. Buy jewellery which is open from behind, avoiding any wax & saving 30 to 40% of overall cost.
2. Sell your jewellery against cash without deducting any commission, etc. at prevailing market rates.