2022 (5) TMI 1183 - AAR - GST

Classification of goods - second hand or used 'Paintings' - determination of the liability to pay tax - applicability of Rule 32(5) of CGST MGST Rules, 2017 - HELD THAT - The provisions of Rule 32(5) of CGST MSGST Rule, 2017 are applicable to sale of such 'Paintings' and tax shall be paid on the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored. On an application filed by IN RE M/S. ASTAGURU AUCTION HOUSE PRIVATE LIMITED 2022 (3) TMI 572 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA has held that Paintings classifiable under Heading 9701 and the applicant was liable to pay GST of 12%. In the said case also, as in the present case, the applicant was dealing amongst other goods, in second hand paintings and it was also held that the provisions of Rule 32 (5) of the CGST Rules were applicable to the applicant in respect of second hand goods. Since in the instant case also the applicant is dealing only in second hand paintings i.e. applicant is buying second hand paintings and selling the same on their website to the highest bidder and no input tax credit is being availed on the purchases of such 'Paintings', therefore the Provisions of Rule 32(5) of CGST Rules will be applicable in the instant case also.

Summary

Issues:
1. Classification of second hand or used 'Paintings'
2. Application of Rule 32(5) of CGST & MGST Rules, 2017 for tax liability determination on the sale of second hand or used 'Paintings'

Classification of second hand or used 'Paintings':
The applicant, M/s. Saffron Art Private Limited, sought an advance ruling on the classification of second hand or used 'Paintings' under the GST Tariff. The applicant procures 'Paintings' on approval basis from both registered and unregistered persons and sells them through online auctions. The applicant argued that the 'Paintings' fall under Schedule II Entry No. 236 Chapter heading 9701, attracting tax at the specified rate. The applicant does not avail input tax credit on these purchases. The Authority noted a previous ruling where a similar case was decided, classifying 'Paintings' under Heading 9701 and imposing a GST rate of 12%. Given the applicant's business model of dealing exclusively in second hand paintings without availing input tax credit, the Authority found the provisions of Rule 32(5) of CGST Rules applicable.

Application of Rule 32(5) of CGST & MGST Rules, 2017:
The applicant applied Rule 32(5) of CGST & MGST Rules, 2017 for determining the tax liability on the sale of second hand or used 'Paintings'. The rule requires tax payment on the difference between the selling price and the purchase price, disregarding any negative value. The Authority referenced a previous ruling involving a similar scenario where the Rule 32(5) provisions were deemed applicable. In the current case, as the applicant exclusively deals in second hand paintings without availing input tax credit, the Authority confirmed the applicability of Rule 32(5) of CGST Rules for determining the tax liability on the sale of second hand paintings purchased and sold by the applicant.

The Authority, consisting of Shri. Rajiv Magoo and Shri. T. R. Ramnani, Member, after reviewing the facts, documents, and submissions, upheld the classification of 'Paintings' under Heading 9701 of the GST Tariff. Additionally, the Authority affirmed the application of Rule 32(5) of CGST Rules for determining the tax liability on the sale of second hand or used 'Paintings' by the applicant. The order clarified that the applicant can apply Rule 32(5) of CGST Rules for second hand paintings purchased and sold by them.