The Fight Against Gold Fraud: How Mandatory Hallmarking Changed Enforcement in India

Before mandatory hallmarking, gold fraud in India was widespread and difficult to prosecute. Under-karating — selling lower-purity gold at higher-purity prices — was the most common form, but counterfeit hallmarks, gold-plated base metals, and fraudulent weight practices also affected consumers. The mandatory hallmarking regime fundamentally changed the enforcement landscape.

The Pre-Mandatory Enforcement Gap

Under the voluntary system, there was limited legal basis for penalising jewellers who sold sub-standard gold. Consumers who discovered purity discrepancies had to pursue individual legal remedies through consumer courts — a slow, expensive process that most buyers avoided. The lack of systematic testing meant fraud could go undetected for years.

The Legal Framework Under BIS Act 2016

The BIS Act 2016 created clear penalties for non-compliance with mandatory hallmarking. Under Section 29, anyone who sells or offers for sale gold jewellery without a proper BIS hallmark faces imprisonment of up to one year, or a fine of not less than Rs 1 lakh and up to five times the value of the goods, or both.

This penalty structure transformed hallmarking compliance from a voluntary best practice into a legal obligation with meaningful consequences.

BIS Enforcement Mechanisms

BIS conducts regular market surveillance through field inspections of jewellery shops to check for hallmark compliance, random sampling of hallmarked articles for purity verification, and coordination with State Legal Metrology Departments for enforcement.

When a hallmarked article is found to have incorrect purity, the consequences trace back through the HUID system to the specific hallmarking centre that tested it — creating accountability at every level.

Consumer Compensation

BIS Rules 2018 (Section 49) establish a compensation mechanism for consumers. If a hallmarked gold article is found to be substandard, the consumer is entitled to compensation of twice the difference in value between the declared purity and the actual purity, plus the cost of testing.

The Rajasthan Fake Hallmark Case

One of the most significant enforcement actions involved a fake hallmarking scam uncovered across Rajasthan, Maharashtra, and Delhi. Non-precious metals (copper, brass) were sold as 22-karat gold with counterfeit BIS hallmarks. The HUID system was instrumental in identifying the fraud — the fake HUIDs did not match any records in the BIS database.

This case demonstrated both the vulnerability of any physical marking system to counterfeiting and the power of digital verification to expose it.

The BIS Care App as an Enforcement Tool

The BIS Care app serves as a citizen-level enforcement mechanism. Any consumer can verify a HUID instantly and file a complaint with photographic evidence if they suspect fraud. Complaints are tracked and routed to BIS enforcement teams. This democratises quality enforcement — millions of consumers effectively become part of the oversight network.

Impact on the Market

The combination of legal penalties, systematic surveillance, HUID traceability, and consumer-accessible verification has measurably reduced gold fraud in India's organised jewellery market. The growth in registered jewellers from 34,647 to over 1,94,000 also reflects the formalisation of the industry — bringing previously unregistered businesses into the compliance framework.

The Ongoing Challenge

Enforcement challenges remain, particularly in areas with limited AHC coverage and among small, unregistered jewellers who fall below the turnover threshold. BIS continues to expand its surveillance programme and work with state governments to strengthen enforcement at the grassroots level.