The transaction you do most is the one you document least
Walk into almost any jewellery shop in India on a busy day and you will see the same thing: a customer slides an old chain across the counter, it gets weighed, a number is agreed, and it comes off the price of something new. Old-gold exchange is the most common transaction in the trade. It is also the one most shops document the worst. The gold is real, the customer is happy, and the paperwork — purity, weight, valuation, how GST was applied — often exists only in the owner's head or a loose notebook. That gap is fine right up until the day it isn't: a GST notice, an income-tax survey, or a dispute with a customer who swears the chain was 22-carat, not 20.
This is a plain-English walk through how to handle old-gold exchange properly — the valuation, the GST treatment half the trade gets wrong, and the records that keep you calm when someone official is standing at your counter. No jargon, no scare tactics. Just the way it should be done.
Purity and weight, agreed in front of the customer
Every clean old-gold transaction starts the same way: you establish what the gold actually is, and you do it where the customer can see. Guesswork here is where disputes and losses both begin.
- Weigh the piece on a calibrated scale and note the gross weight. If there are stones or a meena finish, record stone weight separately so you value only the gold.
- Test purity properly — a touchstone for a quick read, but a karat meter or XRF gun gives a number you can defend later. Write down the fineness you actually paid for, not a rounded assumption.
- Deduct for solder, joints and wastage transparently, and show the customer the net fine-gold weight you are valuing.
- Value at the rate of the day you have already displayed, so the old-gold rate and your selling rate come from the same published number.
- Give the customer a signed voucher with weight, purity, rate and value — even when the whole thing nets off against a new purchase.
None of this slows you down once it is a habit. What it does is turn a verbal deal into a record — one you, the customer and any officer can all read the same way.
Is there reverse charge on old gold? The question everyone gets wrong
Here is the myth that costs shops sleep: "if I buy old gold, I have to pay GST on it under reverse charge." For the ordinary case — a walk-in customer selling their own jewellery — that is not correct. The CBIC clarified back in 2017 that when a registered jeweller buys old gold from an unregistered individual, it is not taxed under the reverse-charge mechanism, because that individual is not selling in the course or furtherance of business. Someone selling their own bangles is not a supplier. So no, you do not raise a self-invoice and pay 3% every time someone exchanges a chain.
Two things do follow from this, and they matter. First, because no GST was charged on that old gold, you cannot claim any input tax credit on it — there is nothing to credit. Second, if you are a dealer who buys and re-sells second-hand pieces as they are, the "margin scheme" under Rule 32(5) — paying GST only on your margin — is genuinely contested for gold. Some advance rulings have allowed it; the Kerala Authority for Advance Ruling took the opposite view, reasoning that gold does not depreciate like ordinary used goods. If your model depends on it, get a written opinion from your CA rather than assuming.
How GST actually applies when old gold becomes a new sale
The exchange itself is not where GST lives. GST lives on the new ornament you sell. When the customer's old gold is adjusted against a new piece, you still raise a normal tax invoice on the full value of that new ornament — you do not net the old gold off first and charge GST only on the balance. The standard treatment is 3% GST on the value of the gold and 5% GST on the making charges.
- Show the full value of the new ornament — gold value plus making charges — as your taxable supply.
- Apply 3% on the gold component and 5% on making charges, as separate lines if your system allows.
- Record the old gold received as part-consideration or a reduction in the amount payable, backed by the buying voucher — not as a discount on the taxable value.
- Keep HUID details for the hallmarked pieces you sell, so the invoice, the tag and the hallmark all agree.
The books that survive a raid
A survey or search is not the time to start reconstructing what happened. Either the records exist, tally, and tell a consistent story, or they don't. The shops that come through calm are the ones where every gram is accounted for from the moment it enters.
- A dated buying register: every old-gold receipt with weight, purity, rate, value and the customer’s name and contact.
- Stock that reconciles by weight — opening, purchases including old gold, new stock, sales and closing — so fine gold in equals fine gold out.
- Tax invoices for every sale with correct 3% and 5% splits, and HUID where applicable.
- Karigar job-work records if that old gold went out to be melted or re-made.
- A clean cash trail, because large unexplained cash against gold is exactly what surveys look for.
The goal is boring books. If an officer can follow every gram from the counter to the safe, there is nothing to argue about.
Where the popular tools leave you exposed
The trade mostly runs on a handful of tools, and each is good at something. Tally is a genuinely powerful accounting engine, but it was built for accounts, not for a weight-priced jewellery counter — old-gold valuation, purity, HUID and rate-of-the-day usually get bolted on awkwardly or handled outside it. Marg has deep jewellery features but lives on a desktop, which means your books sit on one machine in one shop. myBillBook is clean and cheap for simple billing, but it is not built around the specifics of gold. And the "free" local software a neighbour swears by is rarely free once you count the day the machine dies with your only copy of the data on it. None of these are bad products; they were just built for different jobs.
How BizRevolt handles old-gold exchange
We built the Jewellery & Bullion workspace around exactly this transaction, because it is the one that decides whether your books are clean. Old gold in, new ornament out, GST applied correctly, HUID captured, and every gram reconciled — in one cloud system your staff can use at the counter and you can check from your phone.
- A weight-priced POS with one displayed rate of the day driving both buying and selling.
- Old-gold exchange handled as its own flow: purity, weight, a valuation voucher and part-payment against the new sale, all linked.
- GST done right out of the box — 3% on gold, 5% on making charges, HUID on the invoice.
- Per-piece tagged stock that reconciles by weight, plus a karigar job-work ledger for anything you send out.
- Cloud backups, multi-branch transfers and an audit trail built to be shown, not hidden.
You do not need to become a compliance expert to run a clean shop. You need a system that makes the clean way the easy way. If you want to see how your exact old-gold flow would work in BizRevolt, the fastest thing is to just talk to us — I read the WhatsApp myself, or you can call +91 91 0657 4865 and we will walk through it with your own numbers.
Image credit: Adrienne of Oxford, CC BY-SA 4.0, via Wikimedia Commons.
Image credit: Rivaa jain, CC BY-SA 4.0, via Wikimedia Commons.