How to Calculate Making Charges on Gold?

Gold is essentially a symbol of good fortune and this only adds to its stature as a popular investment option across Indian households. Its cultural significance has also strengthened its appeal. 

Regardless of how popular gold may be, it is essential not to step into the buying process blindly. One key factor to understand is how making charges on gold work and how they are calculated. 

Gold-making charges in India generally range between 5% to 30%, depending on the jeweller and the intricacy of the design. In this blog, we will uncover everything you need to know about gold making charges. 

Quick Overview

• Making charges on gold cover labour costs, transportation and handling costs of gold and purity levels for crafting gold jewellery.
• Wastage charges account for gold lost during the crafting process.
• A 5% GST is applicable on gold-making charges.
• Calculation of making charges on gold can be done using a flat rate or a percentage. 

About Gold Making Charges in India & Formula

If it is your first time buying gold jewellery online, you must be wondering what’s the deal about making charges on gold. It is the cost associated with crafting jewellery from its raw gold form. Making charges further cover designing, conceptualisation as well as production. 

The price of gold in India does not remain constant. The cost of gold jewellery usually varies across shops, jewellers and even dealers in specific cities due to differing making charges and other factors. Every city has its daily gold price set by the authorised association. Applicable taxes and purity standards keep the rates relatively in check.

Here’s the gold-making charges formula for your reference:

Gold price per gram x weight (in grams) + making charges + GST applicable on jewellery price as well as making charges = Final Price

Ways to Calculate Making Charges for Gold 

In this section, get a clear idea about the gold-making charges calculation process. Here are the two ways in which gold-making charges can be calculated:

Cost of Gold Per Gram

The gold price remains fixed per gram. The weight of the gold that you are buying shall be multiplied by this rate to deduce the gold-making charges per gram.

Percentage of Gold

In this case, the making charge associated with gold is arrived at, in the form of a percentage of the total gold value. So, the higher the percentage = the more the charge.

Gold Making Charges Calculation

Now, let's consider some real-life examples for you to have a better perspective on how gold-making charges are calculated. Once you understand the process, gold investment shall be simplified for you. 

Calculation with Reference to a Flat Rate

Say, you purchase 5g of gold and the jeweller refers to a flat rate of ₹200/g to arrive at the making charge. In this case, the making charge you shall have to pay would be ₹1,000 (₹5 x 200).

Calculation with Reference to a Percentage

If you purchase gold worth ₹3,00,000 and the jeweller levies 12% as making charges, you will have to pay 12% of ₹3,00,000, i.e. ₹36,000 making charge. 

What Affects Gold-Making Charges in India?

Making charges on gold may vary from shop to shop, and even from city to city. In India, here are a few factors which can affect the gold-making charges:

• Craftsmanship: if there are complex or intricate patterns, the charges could go higher as it requires a high degree of skill and polished craftsmanship.
• Purity Level of the Gold: The quality, as well as purity level of raw gold, significantly impacts the jewellery crafting process. The BIS hallmark is a recognised and reliable indicator of the gold's purity. 
• Associated Transportation and Handling Cost: Gold-making charges include various overhead costs. This includes costs associated with storage, handling, packing as well as transportation. Plus, the charges also account for unforeseen delays/logistical complexities which may impact the timeline of jewellery production. 

GST Applicable on Gold Making Charges

A 5% GST is levied on gold-making charges in India. The central and state governments have their respective shares in this tax. Note that the 5% GST rate applies to jewellery repairs as well, not just on new gold jewellery purchases. 

Final Word 

Understanding the concept of making charges on gold shall allow buyers to make informed decisions when purchasing gold jewellery. Investment in gold jewellery can get you worthy returns in the long term. 

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