How does the scheme actually work?
Not all gold schemes are the same. Some require you to pay a fixed instalment for a set tenure, like 11 months, after which the jeweller might add a bonus instalment or offer a discount. Others might convert your monthly payment into grams of gold at
the prevailing rate. Ask for a clear explanation: Are you accumulating money or grams of gold? What is the exact tenure, and what is the bonus or benefit at maturity? Understanding the fundamental structure is the first step to evaluating if the scheme suits your financial goals.
What about making charges?
Making charges, which cover the cost of crafting the jewellery, can range from 3% to over 25% of the gold's value and significantly impact your final bill. Many instalment schemes offer a discount on these charges as a key benefit. You must ask if making charges are fully waived, discounted, or fixed. Are the charges calculated as a percentage of the gold's value or as a flat rate per gram? Sometimes a discount on high making charges can be more valuable than a bonus instalment, especially for intricately designed pieces. Always clarify this, as it's a major variable in the total cost.
How is GST calculated on the final purchase?
The Goods and Services Tax (GST) is a mandatory component of your bill. In India, the purchase of gold attracts a 3% GST. Additionally, making charges are considered a service and are taxed at 5% GST if billed separately. Ask the retailer for a sample bill that shows how GST is applied to the gold value and the making charges. A transparent bill should clearly break down these components so you know exactly what you are paying for. There is no TDS (Tax Deducted at Source) for individual buyers making purchases through digital payments.
Is the jewellery hallmarked?
Hallmarking by the Bureau of Indian Standards (BIS) certifies the purity of the gold. This is your guarantee that you are getting the quality you paid for, whether it's 22-karat or 18-karat gold. Before enrolling in a scheme, confirm that all jewellery available for redemption under the plan is BIS hallmarked. An authentic hallmark protects your investment and is crucial for assessing its value for resale or exchange in the future. Don't just take the retailer's word for it; ask to see the hallmark on sample pieces.
What happens if I miss an instalment or want to exit early?
Life is unpredictable, and you might face a situation where you can't make a payment. It's crucial to understand the consequences beforehand. Ask about the grace period for a missed payment and if there are any financial penalties. Similarly, inquire about the policy for premature withdrawal. While some schemes may allow you to exit early, you might forfeit the bonus instalment or any accumulated discounts. A reputable jeweller will have clear and fair policies for such scenarios. Getting these details in writing is essential.
What is your policy in case of default or closure?
This is perhaps the most critical question. You are entrusting your money to the jeweller for nearly a year. You must ask about the security of your investment. What happens if the business faces financial trouble or closes down? Historically, customers of some failed jewellery firms have faced significant challenges in recovering their money. Your payments are often treated as an unsecured advance, offering little protection in case of bankruptcy. Therefore, it is vital to choose a well-established, reputable jeweller with a long and trusted history in the market.
Are there any restrictions on what I can buy?
Many schemes are designed for the purchase of jewellery only and do not allow you to redeem your accumulated amount for gold coins or bars. Ask if you can choose from the entire store's collection or only from a specific range of items. What if the piece you want costs more than your accumulated amount? Clarify if you can pay the difference and still retain the scheme’s benefits, such as a discount on making charges. Understanding these limitations will prevent disappointment at the time of purchase.
