2021 (7) TMI 548 - AAR - GST

Determination of quantum of GST - used/ second hand gold jewellery - sub-rule (5) of rule 32 of Central Goods and Services Tax Rules, 2017 - quantification of GST on difference between the selling price and purchase price as stipulated under Rule 32(5) of CGST Rules, 2017 - applicant purchases used/ second hand gold jewellery from individuals who are not dealers under the GST and at the time of sale there is no change in the form / nature of goods - HELD THAT - In the instant case, the supplier, i.e., the applicant is effecting the supply of second-hand jewellery which is taxable under the GST Act as it is covered under entry no.13 of Schedule V to the Notification No.01/2017-Central Tax (Rate) dated 28th June, 2017 which is taxable at 1.5% under the CGST Act and similarly taxable under the KGST Act, 2017 also at 1.5%. Hence, the supplier satisfies the condition that the supply made by him must be a taxable supply. The next condition is the supplier must be a person dealing in buying and selling of second-hand goods. It is seen that the applicant has admitted that he is purchasing used gold jewellery from individuals and selling the same, after cleaning and polishing them. The applicant has also admitted that he is not availing any input tax credit on the purchase of such goods and the goods so purchased are supplied as such - The applicant has stated that he is not melting the jewellery to convert it into bullion and then remaking it to new jewellery but only cleaning the old jewelry and polishing it without changing the nature and form of the jewellery so purchased. These goods are then supplied to other persons. Further, the applicant admits that they are invoicing the goods as used gold ornaments . Hence, the applicant satisfies the second condition also. Thus, the valuation of the supply of second hand jewellery may be made as prescribed in sub-rule (5) of rule 32 of the Central Goods and Services Tax Rules, 2017.

Summary

Issues involved:
1. Admissibility of the application under Section 97(2)(e) of the CGST Act, 2017.
2. Interpretation of Rule 32(5) of the CGST Rules, 2017 regarding the liability to pay GST on second-hand goods.
3. Determination of the eligibility of the applicant to utilize sub-rule (5) of Rule 32 of the CGST Rules, 2017.

Admissibility of the application:
The application filed by M/s. Aadhya Gold Private Limited for Advance Ruling under Section 97 of CGST Act, 2017 is deemed admissible as it pertains to the determination of the liability to pay tax on goods or services, falling under Section 97(2)(e) of the CGST Act, 2017.

Interpretation of Rule 32(5) of the CGST Rules, 2017:
The applicant, engaged in buying and selling second-hand gold jewelry, sought clarification on whether GST is payable only on the profit margin when purchasing from unregistered individuals. The applicant argued that as per Rule 32(5) of the CGST Rules, 2017, GST should be levied solely on the difference between selling and purchase price when no input tax credit is claimed and no change in the nature of goods occurs. The applicant satisfied all conditions under Rule 32(5) as they did not alter the form of jewelry purchased from unregistered individuals, thus justifying application of the margin scheme.

Eligibility under sub-rule (5) of Rule 32 of the CGST Rules, 2017:
The Authority for Advance Rulings, Karnataka, analyzed the applicant's compliance with Rule 32(5) of the CGST Rules, 2017. It was established that the applicant's supply of second-hand jewelry was taxable, and the goods were sold without altering their nature or form. The applicant purchased used jewelry from unregistered individuals, did not claim input tax credit, and sold the goods "as such" after minor processing. As the applicant fulfilled the conditions of dealing in second-hand goods and not availing input tax credit, the valuation of the supply could be determined as per sub-rule (5) of Rule 32 of the Central Goods and Services Tax Rules, 2017.

Judgment:
The Authority ruled that the applicant, dealing in second-hand goods and invoicing supplies as such, can value the supply of second-hand gold jewelry purchased from unregistered individuals without any change in form or nature, as prescribed under sub-rule (5) of Rule 32 of the Central Goods and Service Tax Rules.