The Appeal of the Easy Instalment
For generations, gold has been more than just an investment in India; it's a cultural touchstone, a symbol of prosperity, and a family heirloom. Jewellers have tapped into this deep-rooted desire with gold purchase schemes, often marketed as EMIs. These
plans allow you to pay a fixed amount every month for a specific tenure, typically around 11 months. At the end of the period, you can buy jewellery worth the accumulated amount. Many jewellers even offer a bonus, like paying your final instalment for you or offering a discount, which makes the deal seem even sweeter. This approach makes expensive jewellery feel accessible and provides a disciplined way to save for a planned purchase, like a wedding.
The Sting of Making and Wastage Charges
Here's the first major catch: the amount you pay in instalments often only covers the cost of the gold itself. The final bill includes significant additional costs, primarily 'making charges' and 'wastage charges'. Making charges are the labour costs for crafting raw gold into an ornament and can range from 3% to as high as 25% of the gold's value, depending on the complexity of the design. 'Wastage charges' are what a jeweller charges for the small amount of gold lost during the manufacturing process, which can be another 5% to 15%. Often, these charges are bundled together as 'Value Addition' or VA. Many EMI schemes offer discounts on these charges, but rarely waive them completely, and they must be paid as a lump sum at the time of purchase, on top of your accumulated amount.
The Hidden Impact of GST
The Goods and Services Tax (GST) is another cost that your monthly instalment doesn't account for. When you finally purchase the jewellery, a 3% GST is levied on the total value of the gold. Furthermore, a separate 5% GST is applied to the making and wastage charges. This entire tax amount is payable at the end of the scheme. So, if you've accumulated ₹1,00,000 for gold and the making charges are ₹15,000, you will owe GST on both components, adding a significant sum to your final payment that you may not have budgeted for.
Price Volatility and Regulatory Risks
Some schemes lock in the gold rate at the time of booking, while others have you buy at the rate prevailing on the day of purchase. If the price of gold rises significantly during your tenure, a scheme without a price lock means you get less gold for your money. Conversely, if the price falls, a locked-in rate could work against you. It's also critical to understand that these schemes offered by jewellers are not regulated by the RBI or SEBI in the same way as bank deposits or Gold ETFs. This means if a jeweller goes out of business, your accumulated money is at significant risk, as there is no formal regulator to protect your funds.
The Fine Print on Defaults and Refunds
Life is unpredictable, and you might find yourself unable to make a monthly payment. The penalties for defaulting can be steep. Missing even one payment could lead to the forfeiture of any benefits or discounts you were promised. Some schemes have clauses that if you default, the maturity date gets pushed back. Furthermore, getting your money back is almost never an option. These are purchase plans, not savings accounts, meaning you are obligated to buy jewellery from that specific jeweller and cannot ask for a cash refund. You are locked into buying from them, limiting your choice and bargaining power.
