Do Making Charges Reduce Silver Loan Value?

The short answer is no, because they never get into the calculation in the first place. Usually when a lender assesses what piece of silver jewellery might support as collateral, the assessment tends to be based on the value of the silver content alone. Making charges are part of the purchase price of silver jewellery. However, when a lender assesses jewellery offered as collateral, valuation is generally based on the silver content, applicable purity assessment and prevailing benchmark valuation methodology rather than the workmanship component.

That single distinction explains a gap that surprises many first-time borrowers: the amount paid at the counter and the amount a piece may support as a pledge can sit far apart. Making charges, GST and design premiums are generally excluded during valuation, and the difference between the two figures comes down almost entirely to those excluded components.

What follows covers what silver jewellery making charges are, the two ways jewellers commonly calculate them, how GST applies to each part of the invoice, and why none of it contributes to the amount available under a silver loan.

What Are Silver Jewellery Making Charges?

Making charges pay for labour. More precisely, they cover the craftsmanship and manufacturing effort involved in turning raw silver into a finished ornament, from casting and shaping through to polishing and finishing work.

Jewelers generally bill in two main ways. In the per gram method, a fixed amount of rupees is charged per gram of jewellery manufactured. The illustrative market ranges are around ₹50-₹150 per gram for machine-made jewellery and ₹200-₹600 per gram for intricate handcrafted or filigree work (actual rates depend on the jeweller and location). The percentage method, on the other hand, charges a percentage of the silver’s metal value, with typical illustrative ranges between 8% and 25% of the silver value depending on the piece.

Which approach applies to a given purchase depends on the jeweller, the product type, the location, the level of craftsmanship and the complexity of the design.

Per-Gram vs Percentage Method: An Illustrative Example

Consider a silver anklet weighing 50 grams, with an illustrative silver price of ₹234 per gram. The metal value works out to ₹11,700. The two billing methods then produce very different workmanship figures on top of that same metal value.

Note: These figures are illustrative examples only. Actual amounts vary by jeweller, borrower profile, prevailing prices and applicable guidelines.

Same anklet, same silver, two very different bills. Making charges can swing significantly even where the underlying silver content remains identical, and this becomes important later because loan valuation generally focuses on the silver itself rather than the workmanship component that sits on top of it.

How GST Applies to Silver Jewellery Making Charges

Jewellery invoices may separately identify the silver value and workmanship component. Where making charges are itemised separately, GST may apply to the silver value and the making charges according to the applicable rates and notifications in force at the time of purchase. Tax treatment may vary depending on product classification, invoice structure and prevailing regulations.

Taking the percentage-based example above, the silver value stands at ₹11,700 and the making charges at ₹1,755. On an illustrative basis, GST at 3% on the silver value comes to approximately ₹351, GST at 5% on the making charges adds roughly ₹88, and the total GST lands at around ₹439, subject to the rates in force at the time of purchase.

Where making charges run higher, the tax attributable to the workmanship portion rises in proportion. Yet neither the GST nor the making charges themselves generally contribute anything to silver loan valuation.

Why Making Charges Are Excluded from Silver Loan Valuation

This is the concept the whole subject turns on. Under the RBI (Lending Against Gold and Silver Collateral) Directions, 2025, silver collateral is valued on purity-adjusted silver content and prescribed benchmark pricing methodologies, and loan eligibility follows from the assessed metal value read against the applicable loan-to-value (LTV) limits.

In practice, what a lender generally assesses comes down to four things: the purity of the item, the net silver content it holds, the applicable benchmark value, and the regulatory LTV limit for the relevant loan slab. What typically stays outside the calculation is everything the metal is not, which includes silver jewellery making charges, the GST paid at purchase, branding premiums, artistic premiums and any collector value the piece may carry.

Hence the frequent surprise. The retail purchase price and the eventual silver loan value can differ substantially, and the difference is built into how the framework values collateral rather than being a quirk of any single lender.

Illustrative Example: Retail Price vs Silver Loan Value

A worked example makes the gap concrete. Assume a jewellery item was purchased with the following invoice components.

Note: These figures are illustrative examples only. Actual amounts vary by lender, borrower profile, prevailing benchmark prices and applicable guidelines.

Now assume the piece tests at 925 sterling silver, giving a net silver content of 46.25 grams, with an illustrative benchmark silver value of ₹234 per gram. The estimated silver valuation works out to 46.25 × ₹234, or approximately ₹10,820. Applying an illustrative loan-to-value (LTV) ratio consistent with the applicable regulatory framework and lender policy, the potential loan eligibility may be approximately ₹9,200, subject to prevailing benchmark values, lender assessment and regulatory requirements.

₹18,351 paid. About ₹9,200 potentially available. The silver loan value rests primarily on silver content, not on the full retail cost of the jewellery, and this example shows how wide that gap can run in ordinary purchases.

How Silver Purity Affects the Impact of Making Charges

Silver jewellery is sold across several purity grades, commonly 999 fine silver, 958 Britannia silver, 925 sterling silver and 800 silvers. The grade decides how much recoverable silver actually sits inside the piece. For illustration, 100 grams of 999 silver contain approximately 99.9 grams of silver, while 100 grams of 925 silver holds around 92.5 grams.

Here is where the two ideas intersect. Many jewellers apply making charges independently of purity, so a lower-purity ornament may carry similar workmanship costs while containing less countable silver. From a lending perspective, that pushes the share of the purchase price attributable to making charges even higher, widening the gap between what was paid and what the metal may support.

Is 925 Silver Genuine Silver?

Yes. Sterling silver marked 925 is 92.5% silver mixed with other metals for strength and durability and is generally recognized as real silver. For valuation purposes, lenders normally discount the weight to reflect the actual silver content, rather than assuming the gross weight is pure metal.

Understanding the Price-to-Loan Gap

The price-to-loan gap generally reflects the difference between the retail purchase price of jewellery and the value assessed for lending purposes. Factors contributing to this difference may include the exclusion of making charges, GST paid at the time of purchase, branding premiums, design premiums and other non-metal components. In addition, valuation is generally based on prevailing benchmark pricing methodologies and assessed silver content rather than the historical purchase price of the jewellery.

Conclusion

Making charges buy craftsmanship. They cover design, labour and manufacturing effort, and they contribute to the retail purchase cost of jewellery, yet they generally form no part of silver loan valuation. When determining eligibility for a silver loan, lenders usually assess the purity, the net silver content, the applicable benchmark value and the regulatory loan-to-value limits, which means jewellery with high workmanship costs may support a significantly lower loan amount than its purchase price might suggest.

The invoice tells the full story. Its breakdown between metal value and making charges gives a reasonable early sense of the amount a piece may support when offered as collateral, subject to lender assessment. Valuation procedures, disclosures, and collateral handling are carried out in accordance with applicable policies and regulations.

Disclaimer : The information in this blog is for general purposes only and may change without notice. It does not constitute legal, tax, or financial advice. Readers should seek professional guidance and make decisions at their own discretion. IIFL Finance is not liable for any reliance on this content. Read more