Money Savings


A man in Kerala was recently arrested by the Customs for smuggling gold in a rather novel way – he had ‘painted’ gold worth INR 14 lakhs in the inner layers of the jeans that he was wearing, in a paste form. That speaks for Gold and its royal properties, and of course the innovative smuggling methods.

Gold has been traditionally the most preferred long term investment for Indians. While wearing a glittering ornament is an elite feeling, the safety that gold provides to your wealth is impeccable and the real underlying reason for such heavy preference across centuries. Gold reserves are limited, thus, it derives its value from its demand against its supply. Since the mining of gold has been on a decline over the past decades, the value of this precious metal has been rising. Being high in density, the gold carries a lot of value occupying very little space, making it easy to carry and store. Think of it as carrying or storing 1 kg of gold as compared to its value i.e. ~50 lakhs in currency notes – clearly gold is much safer. Besides, Gold is a noble metal that does not corrode owing to chemical reactions, unlike other metals. It is the most non-reactive of all metals and benign in all natural and industrial environments. This makes it easier for people to pass on the same across generations, as compared to land property whose ownership Government records control and legal tender which are in absolute control of the Central Bank and can be devalued sometimes, merely by rogue Government order.

Once mined and sold, gold is easy to carry, store and even smuggle or hide. You can keep it in secret chambers unopened for decades and still find it glittering years later. Since its price is not controlled by Government, it is safe for ultra long term wealth accumulation. That’s why buying gold has been the most common method for storing unaccounted black money, not only providing protection to wealth but also keeping it safe from the clutches of the tax departments and the Governments. To enable the same, the entire value chain of Gold sellers have a ‘Kachha’ system running parallel to the ‘Pakka’ system where you can buy gold using your unaccounted money. For a long time, the Governments have failed to bring the unaccounted money in the form of gold, back into the economic system, to collect taxes on the same, however, the latest change in hallmarking rules is making a hard attempt to put an end to the ‘Kachha’ system, forever!


Gold can be easily adulterated and its purity can be tampered with without the general public noticing it while buying. In the 1990s, fraudulent activities were on the rise and the trust in gold was declining steeply. Thus, to protect the interests of the buyers, the Government of India had introduced Hallmarking scheme in the year 2000 which allowed the jewellers to depict that the gold they were selling is of legal standards of purity as mandated by the Bureau of Indian Standards (BIS). A similar scheme was introduced for silver in the year 2005. It helped the buyers gain trust in the item they were buying and thereby, the jeweller as well. However, the same is voluntary – meaning the jewellers have a choice whether they wish to be a BIS authorised jeweller or not. Only BIS authorised jewellers can sell hallmarked jewellery that certifies the purity of the gold content in it. As of March 31, 2020, the total number of jewellers registered with BIS is 30,626 who can sell hallmarked jewellery. Similarly, the number of Assaying and Hallmarking Centre (AHCs) which are laboratories to test the purity of the bullion items, as of March 31, 2020, is 915. These numbers have grown only in recent years with an increase in consumer awareness, as 490 AHCs were set up only during the last 5 years.

In November 2019, the Government announced that hallmarking of gold jewellery would become mandatory from January 15, 2021. However, the deadline was extended to June 1, then to June 15 whereby 256 districts were selected for the first stage of implementation. After negotiating with the bullion associations and federations, the date was further extended to August 31, and following the widespread protests and strike on August 23, this date is now further extended by three months to November 30. All India Gem and Jewellery Domestic Council (GJC) remarked that the new rules could cause ‘huge unrest in the country’. Hallmarking ensures transparency and boosts trust in the trade of bullion items, and yet the jewellers have been protesting or trying to defer the mandatory implementation of the hallmarking scheme. The reaction of the industry might seem odd to you, until you unearth the hidden reality of the situation, amongst other genuine causes of concern.

What is Hallmarking of jewellery?

Hallmarking is simply a quality certificate issued by the BIS guaranteeing the purity of gold in a certain piece of jewellery. The certificate is issued to all registered jewellers based on purity tests at BIS approved centres. The jeweller has to get his store registered with the BIS to become an authorised jeweller. Besides, all items of jewellery would contain a BIS hallmark logo denoting its purity. The BIS officers often conduct visits to jewellery stores and sample check items for the authenticity of the details mentioned on jewellery and compliance with other rules and regulations.

Why is Hallmarking important?

Before Hallmarking, consumers did not have any surest way of determining the purity of gold in their jewellery. The hallmark serves as credible proof of the quality and purity of a gold item as it ensures that the same conforms to international and national standards of purity and fineness. It protects the public against contamination and also compels the gold jewellers and manufacturers to maintain legal standards of fineness and purity.

Since Gold is usually bought for long term purposes, historically it has been difficult for retail buyers to prove the purity of the gold when redeeming the same. While buying the jeweller may sell it as 24k or 22k gold. However, the same gold when redeemed years later is denoted to be of inferior quality by another jeweller. As Gold does not deteriorate even after decades, the consumer has no idea whether he was duped while buying or while selling. Hallmarking serves as a certificate of purity and can easily be relied on by the consumers as well as the jewellers when the jeweller is being redeemed. Besides, a person can sell jewellery to another person and the hallmark serves as the trusted basis of evaluation.

So, whether you buy gold jewellery, coins or anything else, is it essential that you always go for hallmarked items.

What is HUID in Hallmarking?

At the root of the entire confusion about new rules has been ‘HUID’. The jewellery industry has welcomed the move towards mandatory hallmarking, however, the new HUID regulations have caught them by surprise.

HUID is a proposed unique code to be given to every piece of jewellery at the time of hallmarking. The code will help in identifying the jeweller and the Assaying and Hallmarking Centres (AHCs) who had hallmarked the jewellery. The HUID will be a six-digit alphanumeric code tagged on every piece of jewellery. The number shall be unique for the country and centrally managed with a database.

Why is HUID a concern?

With HUID, the Government can easily track every piece of jewellery in the country. A piece of jewellery may change many hands and travel across different parts of the country, and still the details of the jeweller and the AHC who initially hallmarked the jewellery can still be traced from the same, thanks to the unique code tagged to it. Vice versa, since all jewellery items would be numbered with HUID centrally, the details of jewellery hallmarked by each jeweller would be available with the Government agency. This ensures that all the future buyers and sellers of the jewellery after HUID tagging can be traced whenever the Government wants to and this directly affects the ‘Kachha’ system.

Post 100% HUID implementation, when the tax department raids a taxpayer and finds unaccounted jeweller, it can trace the original and every other seller of the jewellery and ask them to disclosure how they happen to be in possession, the consideration paid, the payment receipts and the source of such money. If the money is found to be unaccounted for, tax notices and penalties could follow. Similarly, a jeweller will have to mandatorily reconcile his total sales during the year with the total jewellery hallmarked during the year. Any difference apart from adjustment on account of opening and closing inventory could result in tax penalties. Besides, any gold being smuggled can also be traced to the original jeweller who could be held accountable to explain or reveal the details of its buyers. HUID can also help in tracing gold held by criminals and terrorists to its original buyer and thereby, investigating the chain of people in between.

This can disrupt the entire ‘Kachha’ system and jewellers would be at the centre of the accountability. While jewellers would be happy to help in tracing the criminals and terrorists, they also fear being held responsible for the inhuman activities without being a part of it and the red-tapism which may follow the same. Besides, most jewellers only help the general public to buy with their unaccounted money and such tracing can shrink their customer base, as people may not prefer buying gold items with the same magnitude or volume, as they have done historically.

That said, all of the above is a long way from today, as Government firstly has an ardent task of widespread implementation of rules and establishment of such infrastructure to enable tracing, using the public machinery and dealing with people who won’t give up easily. So, HUID is only the initial step of sowing the seeds, as continuous watering would be required for years before the tree finally bores its fruits. 

What are the other genuine hardships?

Firstly, the jewellers will have to report the HUID to the Government agency. Thus, there’s not just a whole new world of accountability, but also added work of continuous reporting and reconciling. Secondly, the pace at which jewellery is hallmarked in our country does not match the manufacturing of the same by far. There is an immediate need for infrastructure to fill up the gap between 10-12 crore pieces produced every year and 7 crore pieces annual hallmarking capacity. Besides, there is already a huge pile of 6-7 crore jewellery items waiting to be hallmarked. Every extra day taken for hallmarking is a loss for the jeweller. Thirdly, the hallmarking process is manual and there’s no new announcement so far to make the same automatic. The manual process may result in duplication of numbering and it leads to bigger confusion than attending to the elephant in the room. Jewellers have also raised various other concerns such as unclarity of rules concerning re-registration when the piece of jewellery is customised or slightly altered, as the hallmarking system is already over-burdened. If a customer wants a 24-inch chain to be reduced to 20 inches, an in-house technician usually handles the request immediately, however, with new rules, it won’t be possible to provide the same immediately and may have to undergo re-hallmarking before handing it over to the customer.

Who is exempt from hallmarking?

The Government has announced the following exemptions from hallmarking rules, to provide relief from the hardships:

  1. Jewellers with annual turnover up to INR 40 lakhs are exempt from mandatory hallmarking.
  2. Hallmarking is currently mandatory only in 256 districts out of 715 districts in India. The new rules are to be implemented in a phased manner.
  3. Gold embedded in an item such as watches, fountain pens and other special types of jewellery like Kundan, Polki and Jadau is also exempted from hallmarking.
  4. Export and re-import of jewellery as per Trade Policy of Government of India for international exhibitions, government-approved B2B domestic exhibitions are also exempt from hallmarking requirements.
  5. Artisans or manufacturers who manufacture the gold jewellery on a job work basis for the jewellers and do not directly sell jewellery to anyone are exempted from obtaining a license.
  6. Jewellers are allowed to buy back old un-hallmarked jewellery from customers until the new rules come in force.
  7. Alteration in the Hallmarked jewellery up to 2 grams of increase or decrease is allowed with the responsibility of purity on the jeweller, without the need for re-registration.

Important points for Gold buyers

If you are looking to buy gold, the following is some important information you should keep in mind to avoid being duped:

  1. Gold is available in 24 carats, 22 carats, 18 carat and 14-carat forms. Carat is the measure of the purity of gold. 24-carat gold is the purest form of gold, however, the same is malleable and therefore, jewellery is usually in 22-carat form. Gold bars, biscuits and coins can be of 24 carats. Carat is denoted by ‘K’, for example, 24k.
  2. The price of gold is per gram. However, the traditional method of measurement in India has been ‘tola’ where 1 tola is equal to 10 grams. The prices of gold, even at jewellery shops, changes every day. And there are different prices for gold according to its purity. So, purity of gold, price of that category and the weight of the gold are things you must know before you pay the jeweller.
  3. Modern jewellery also includes artificial and designer items such as pearls, to complete the overall look. Thus, the total weight of jewellery (Gross weight) would be higher than the weight of gold (Net weight) in it. In such cases, the jeweller usually provides the breakup of gold and other components (tagged to the jewellery) and charges market rates for the gold portion and additional charges for other items.
  4. Jewellers also add making charges for the designing, making and customizing the gold jewellery which ranges widely between 3% to 25% according to the design of jewellery. This can be a fixed charge per piece or variable based on the gold value of the jewellery, or variable based on the total value of the jewellery. Jewellers often offer discounts on the making charges and thus, this is your room for negotiation in pricing.
  5. The GST rate on Gold is 3% on the final value of the gold item including its making charges, irrespective of its form whether jewellery, bars, biscuits or coins.
  6. Always buy hallmarked items. Currently, hallmarking is not mandatory for all items, however, it may become mandatory soon. To ensure the purity of the gold in any bullion item, look for a hallmark sign on it which consists of four details – the triangle mark of BIS (Bureau of Indian Standards), the caratage and fineness (e.g. 22K915, 18K750, 14K585 where 22k, 18k and 14k is caratage while 915, 750 and 585 is fineness), the mark of the jeweller, and the mark of AHC who hallmarked the jewellery.
  7. If you are suspicious of the Gold jeweller, you may ask for his BIS license. Usually, the BIS license is displayed in the store, as the same is mandatory as per the BIS rules. Importantly, check the address of the store on the license if the same matches with the actual address.
  8. You can also check the purity of jewellery by yourself, simple by visiting an authorised Assaying and Hallmarking Centre (AHC), by paying a small fee. The list of AHCs is available on the BIS website It also enlists the suspended AHCs whose license has been cancelled. After testing, the AHC issues a report giving details of the purity of the gold. Hallmarking charges cannot exceed INR 35 + GST per piece. The same was silver items is INR 25 + GST per piece.

The road ahead

New rules usually face resistance – people usually do not like changes as it brings more hardships in the initial phase, even if the end goal promises fairness and justice. Also, there are always some genuine hardships which most often Government isn’t even aware of, or fails to address in the initial set of rules; see GST law for example where so many abrupt changes have been made over the past 4 years or the new income tax website, as the latest example. Besides, there are always some powerful juntas working in rhythm who ensure their interests are fulfilled before the new laws kick in. Overall, the new laws promise a better world for the citizens, however, there are miles to go before the Government can take a rest!