The Price You See vs. The Price You Pay
The daily gold rate flashing on news channels is just the starting point. This 'spot price' refers to the cost of pure, raw gold. When you purchase either a coin or an ornament, you pay a final price that includes several additional charges. For the buyer,
the crucial difference between coins and jewellery lies in how large these extra costs are and how much of your initial payment you can recover upon selling.
Making Charges: The Cost of Craftsmanship
Making charges are what you pay for the labour and skill required to transform raw gold into a finished product. This is where coins and jewellery dramatically diverge. Gold coins, being machine-stamped and uniform, have very low making charges, typically ranging from 1% to 8%. In contrast, gold jewellery, with its intricate designs and manual craftsmanship, carries significantly higher making charges, often starting from 8% and going as high as 25% or more for complex pieces. This cost is non-recoverable when you sell, making it a direct loss from an investment perspective.
Wastage: A Hidden Cost in Jewellery
Often appearing on jewellers' bills, 'wastage' is another charge unique to jewellery. It is intended to compensate the jeweller for the minuscule amount of gold supposedly lost during the manufacturing process, like in cutting, soldering, and polishing. This charge can range from 5% to 7% of the gold's value and, like making charges, is an added cost that you do not get back upon resale. Gold coins, being minted, do not have wastage charges.
Purity and Hallmarking: Your Guarantee of Value
Purity is paramount. Investment-grade gold coins are typically sold in 24 Karat (99.9% pure) form. Jewellery, for reasons of durability, is usually made from 22 Karat (91.6% pure) or 18 Karat (75% pure) gold. Regardless of the form, it is mandatory in India for all gold items to be hallmarked by the Bureau of Indian Standards (BIS). The modern hallmark includes a six-digit alphanumeric Hallmark Unique Identification (HUID) code, which allows you to verify the item's purity and other details through the BIS Care app. Insisting on a HUID-hallmarked product is your best defence against being sold lower-purity gold.
The Uniform Impact of GST
The Goods and Services Tax (GST) is applied uniformly across both gold coins and jewellery. A 3% GST is levied on the value of the gold itself. Additionally, there is a 5% GST applicable to the making charges. While the 3% GST on the metal's value is consistent, the total GST you pay on jewellery will be higher simply because the making charges, which are also taxed, are substantially greater.
Resale Value: The Ultimate Test of Investment
This is the most critical factor for an investor. When you sell gold, you are paid only for the weight of the pure gold. All the making charges, wastage, and associated taxes you paid are lost. Because gold coins have minimal making charges and no wastage, their resale price is very close to the prevailing market rate for gold. When selling jewellery, the jeweller will melt the item, assess its purity, and deduct all the initial making and wastage charges. This means the value you recover from jewellery is significantly lower than from a coin of the same initial purchase price.
