2022 (4) TMI 1137 - AAR - GST

Calculation of GST - used/second hand gold jewellery or ornaments from persons who are not registered under GST - at the time of sale of such goods there is no change in the form/nature of such goods and ITC will also not be availed on such purchase - whether GST is to be paid only on the difference between the selling price and purchase price as stipulated under Rule 32(5) of CGST Rules, 2017? - failure to furnish the substantiating documents as required by this authority - HELD THAT - Applicant is stated to be engaged in the business of buying and selling of old/used/second hand gold jewellery/ornament from the unregistered person, who are all general public. They have stated that these articles will be sold as such to the end consumers, i.e., the used/second hand gold ornaments so purchased are sold in the same form in which they are purchased to another registered or unregistered person, except for some minor processing in the form of cleaning and polishing, without altering the nature of such ornament/jewellery. It is seen that the applicant is engaged in taxable supply of jewellery. They are dealing in buying the jewellery from the individuals as seen from the document furnished. To substantiate that the so purchased jewellery was subjected to only minor process which do not change the nature of the goods, the applicant has not furnished any documentary evidence, though the same was specifically called for during the hearing. The applicant has submitted a sample invoice no. ARA/07/2021-2022 dt. 01.12.2021 mentioning sale of Used Gold Ornament issued to Mrs. Aarthi Abinaya, for the gold ornaments namely stud with jimikki and ring. However, Purchase receipt number/grammage for such purchase is not indicated in the said sale invoice. Also, in the purchase invoice submitted the ornaments said to have purchased do not include the Stud with Jimikki and ring and hence from the furnished documents, we are constrained to verify the claim of the applicant that he undertakes sale of used goods. Advance ruling is a facility extended and the person seeking the same has to furnish the details as required by this authority to verify and pronounce the ruling - In the instant case, from the documents furnished, there is no clear cut link between purchase sale, and the applicant do not furnish the purchase details and grammage in the sale invoice. Thus the applicant has not furnished with the documentary proof that he satisfies the conditions provided under Rule 32 (5) enabling him to adopt the differential value as prescribed in the said rule. Hence, No ruling is extended.

Summary

Issues Involved:
1. Eligibility to avail Rule 32(5) of the CGST Rules, 2017 for determining the value of supply of used/second-hand gold jewellery.
2. Compliance with conditions specified under Rule 32(5) of the CGST Rules, 2017.
3. Requirement of documentary evidence to substantiate the claim.

Issue-wise Detailed Analysis:

1. Eligibility to Avail Rule 32(5) of the CGST Rules, 2017:
The applicant sought an advance ruling on whether GST should be paid only on the difference between the selling price and purchase price of used/second-hand gold jewellery as per Rule 32(5) of the CGST Rules, 2017. The applicant argued that they buy and sell old/used/second-hand gold jewellery from unregistered persons and sell them 'as such' after minor processing like cleaning and polishing without altering the nature of the goods. They currently charge GST at 3% on the entire consideration received from customers.

2. Compliance with Conditions Specified Under Rule 32(5) of the CGST Rules, 2017:
The rule stipulates that the value of supply for second-hand goods should be the difference between the selling and purchase price if:
- The supply is taxable.
- The supplier deals in second-hand goods without changing their nature.
- No input tax credit (ITC) is availed on the purchase of such goods.

The applicant claimed compliance by stating:
- They are engaged in taxable supply of jewellery.
- They purchase old/used gold jewellery from individuals and sell them after minor processing.
- They do not avail ITC as the purchases are from unregistered persons.

3. Requirement of Documentary Evidence to Substantiate the Claim:
The applicant was required to provide documentary evidence to support their claim of fulfilling the conditions under Rule 32(5). Despite multiple requests, the applicant failed to furnish:
- Detailed write-up on the process from purchase to sale.
- Trail of accounts and documents at each stage.
- Specific purchase and sale details linking the transactions.

The applicant provided some documents like purchase receipts and sale invoices but did not substantiate the minor processing claim or link specific purchases to sales.

Judgment:
The authority concluded that the applicant did not provide sufficient documentary proof to verify the compliance with Rule 32(5). Therefore, no ruling was extended on the question sought by the applicant. The ruling emphasized the necessity for clear and complete documentation to substantiate claims for advance rulings under the GST framework.