The majority of the general public opt for the ideal or nearest jeweller when looking to buy gold ornaments. They simply browse through the collection and ask the price of each one.
Buyers don’t bother to check the final price as they completely trust the seller. However, it is not something that is recommended.
The price calculation of gold differs with jewellers and there is no standard in this process throughout the country. Hence, you must keep in mind the various costs you are paying like GST, making charges, etc. when making such purchases.
The current GST rate on gold jewellery is 3% throughout India. The GST rate affects gold jewellery in various ways. This rate is applicable on the final price, which includes the following:
- Current price of gold multiplied with the jewellery weight in gm.
- Making charges.
Consider the following Example to Understand the GST Calculation
Assume that the jewellery you are buying weighs 20 gm. Now, the current price of gold is Rs. 32,000 for 10 gm of 22k gold.
So, the price now stands at Rs.64,000 (Rs.32,000/10 gm x 20 gm). The jeweller adds the making charge – assume 8%, which makes it Rs.5,200 (Rs.64,000/100 x 8).
Thus, the final price that you pay for your gold jewellery is Rs.71,276 (Rs.69,200 + Rs.2,076).
Things to Remember Before you Buy Gold Jewellery:
1. BIS Hallmark
The Bureau of Indian Standards (BIS) hallmarks gold jewellery to certify their purity and fineness. The organisation puts their logo along with the fineness number, next to the karat number, on every tested ornament.
For example, the fineness number on an example of 22k jewellery is “22k (916)’, on a 18k product is “18k (750)”, and on a 14k ornament is “14k (585).”
2. Gold Purity
The purity of gold jewellery is measured in karats (k). A majority of jewellery is 22k consisting of 91.6% gold. The rest includes silver, copper, zinc, or cadmium to make the ornament durable.
The purest form is 24k. However, this type of gold is too soft to be used for manufacturing jewellery.
3. Making Charges
The making charges are the manufacturing fees that jewellers add on an ornament. Usually, more intricate and detailed products come with higher charges. Also, the charges are higher if the item is man-made instead of machine-made.
Making charges differ with jewellers. They impose this charge either at a flat rate or a particular percentage. The impact of the GST rate on gold is high when the prevailing price is high and vice versa.
4. Gold Price
The price of gold fluctuates every day. It depends on various factors like supply, demand, etc. The increasing and decreasing price not only affects the cost of jewellery but also gold loans.
Fluctuating prices affect the LTV of gold loans and their interest rates. The amount you avail is usually lower than the total price of your collateral. A lender may also ask for more gold in case the price starts to fall. Hence, availing such a secured loan is not an ideal option to go for.
Make sure to check all these factors mentioned above before you purchase gold. Checking the price before you purchase a product will also make it transparent to see the Goods and Services Tax rate on gold.