Buying Physical Gold: Making Charges, GST 3%, Hallmarking

Most Indian families will buy physical gold at some point — a wedding, a birth, a Dhanteras coin. The metal is identical everywhere; what varies wildly is what you pay over it and what you get back when you sell. This page is the practical layer: making charges, GST, hallmarking, and the buyback maths jewellers rarely volunteer.

What you actually pay for a piece of jewellery

Take a 10-gram, 22K chain with a jeweller quoting ₹14,000 per gram and 10% making charges:

• Gold value: 10g × ₹14,000 = ₹1,40,000
• Making charges: 10% = ₹14,000
• GST: 3% on (gold + making charges) = ₹4,620, plus 5% on the making-charge portion where billed separately
• You pay: roughly ₹1,58,600-1,59,000

The day you sell it back, the jeweller values the metal at the day's rate minus a purity adjustment, and pays nothing for the making charges. If gold is unchanged, you recover roughly ₹1,40,000 minus the buyback haircut — about ₹19,000 (12%) evaporates in a zero-return scenario. That is the real cost of jewellery as an asset (Source: GST Council rate schedule / CBIC for the GST components).

Making charges — negotiable, and structured three ways

Making charges cover design and craftsmanship, and they vary more than the gold price itself:

• Percentage of gold value — the most common structure, typically 8-15% on machine and hand-made jewellery; designer and bridal pieces can exceed 20-25%.
• Flat per-gram rate — common on plain gold chains and coins; easier to compare.
• Fixed per-piece — common on light-weight daily-wear items.

It is a margin line, not a tax — jewellers discount it during festive sales, and the discount never reduces your GST bill. Coins and bars carry little or no making charge, which is why they are the only physical form worth thinking of as investment gold.

GST on gold: 3%, plus 5% on making charges

The rate card, unchanged through the September 2025 GST rationalisation (Source: GST Council rate schedule / CBIC):

• 3% GST on the gold value — applies to jewellery, coins and bars alike.
• 5% GST on making charges when billed separately; where a single composite price is quoted, GST works out on the composite value.

No GST applies when you later sell gold back to a jeweller — the tax hits the buy side only. Note that GST also applies to digital gold purchases on apps; Gold ETF and mutual fund units attract no GST at purchase, one of the quiet advantages of paper gold.

Imported metal also carries customs duty — cut to a total 6% in the July 2024 Budget — which is embedded in the domestic price you see quoted (Source: Union Budget 2024-25 customs changes). You cannot avoid it; just know the domestic rate already includes it.

BIS hallmarking and the HUID: your purity guarantee

Since June 2021, gold jewellery sold by registered jewellers in India must be hallmarked, and since 1 April 2023 the old four-digit purity marks gave way to the HUID — Hallmark Unique Identification — a six-digit alphanumeric code laser-marked on each individual piece, along with the BIS logo, purity in carat and fineness, and the jeweller's ID (Source: BIS hallmarking FAQs, bis.gov.in).

How to use it:

1. Look for the three-part mark on the piece: BIS logo, purity/fineness (e.g. 22K916), and the six-digit HUID.
2. Verify the HUID in the BIS Care app before paying — it should return the jeweller's registration and the purity declared.
3. Ask for the itemised invoice showing gross weight, net weight, purity, making charges and GST separately.

BIS currently hallmarks seven gold caratages — 9K, 14K, 18K, 20K, 22K, 23K and 24K — so 24K coins can carry a hallmark too (Source: BIS). A piece without a valid HUID has no certified purity; if a jeweller says 'hallmarking machine is down, take it without', walk out.

Jewellery vs coins vs bars

If you must hold physical gold as an asset, 24K hallmarked, sealed bars from a bank-quality refiner are the only defensible form — and even then, compare the total cost against a Gold ETF, which holds the same metal with no storage or purity problem for a ~0.3-0.8% annual fee.

Buyback realities — what jewellers actually pay

Every major chain advertises a buyback or exchange scheme. Read the fine print:

• Making charges are never refunded. You paid 10-15% extra at purchase; none of it returns.
• A purity deduction applies on non-hallmarked or worn pieces. Some jewellers deduct 0.5-2% even on hallmarked metal for wastage and refining.
• Stones and weights: gem-set pieces are valued for gold weight only; the price you paid for diamonds or coloured stones may return nothing on buyback.
• Original invoice required. No invoice, no scheme — most buybacks need the bill and the hallmark intact.
• Exchange beats cash. Most schemes pay the best rate only against a new purchase; a cash buyback typically gets a bigger haircut. If the jeweller's own brand (say a coin minted by the chain) is sold back to the same chain within its scheme window, terms are usually the least punitive.

The honest summary: expect to recover the metal value minus 2-10% depending on form, condition and scheme — not the price you paid.

Jeweller instalment schemes — read before you commit

Festive-season 'gold saving schemes' from jewellers work like this: you pay 11 monthly instalments and the jeweller credits the 12th (often capped at a multiple of your instalment), redeemable against purchases. Two cautions. First, the benefit is usually redeemable only against jewellery — which means making charges and stone costs are waiting on the other side. Second, these are unregulated deposit-style arrangements: the money sits with the jeweller, not a trust account, and if the store shuts you are an unsecured creditor. Use them only with an established chain you already shop with, and only for gold you intend to buy as jewellery anyway. As an investment scheme, a SIP in a gold fund does the same job with SEBI oversight.

Selling later: the tax

Physical gold sold after 24 months of holding is long-term: a flat 12.5% capital-gains tax without indexation (Source: Finance (No. 2) Act, 2024). Sold earlier, the gain is taxed at your income-slab rate. Gifts to relatives and inherited gold are not taxed on receipt, but the original owner's purchase price and date carry over when the recipient sells — keep old invoices.

Cash buybacks above ₹2 lakh from a single jeweller in a day are not permitted in cash under Section 269ST of the Income-tax Act — accept bank transfer (Source: Income-tax Act, 1961, s.269ST).

Storage — the cost nobody adds up

A bank locker costs roughly ₹1,500-5,000 a year depending on size and bank; home safes shift risk to theft and fire, and insurance for home-stored jewellery is rarely held. Over 10 years, locker fees alone can equal 1-2% of a modest holding's value — a silent expense a Gold ETF never charges. Insure or locker anything above small amounts.

When physical gold is the right answer anyway

This page reads like an argument against the metal — it is an argument against the wrapper, not the metal. If the gold is a gift that will be worn, if it is part of a wedding budget on a fixed date, or if an elderly family member simply will not trust anything without weight, buy it — you are buying a thing, not an asset, and the checklist above is how you buy the thing well. The mistake is only one: letting the jewellery slice quietly stand in for the portfolio's gold allocation. Keep the two ledgers separate and there is no conflict.

A clean checklist for your next purchase

1. Decide purpose first: if this is portfolio money, stop and buy a Gold ETF or gold fund instead.
2. Buy hallmarked 22K/24K only; verify the six-digit HUID in the BIS Care app before paying.
3. Insist on an itemised invoice: net weight, purity, making charge, GST line by line.
4. Negotiate making charges — never pay above ~15% for plain machine-made work.
5. Keep the invoice forever — it is your buyback ticket and your cost basis for capital gains.
6. For investment intent, prefer sealed 24K bars or coins over jewellery.
7. Check the jeweller's own buyback policy before buying, and note exactly what it excludes.

Bottom line

Physical gold is a fine thing to own and a poor thing to invest through: making charges and GST enter at purchase, haircuts exit at sale, storage taxes the middle. Buy it for weddings and wearing with open eyes — and route the portfolio's gold through paper.

Compare every route in our gold comparison guide or the broader five-ways overview.