9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (7) TMI 523 - AAR - GSTValuation - purchase of used / second-hand gold jewellery or ornaments - Difference between the selling price and purchase price as stipulated under Rule 32(5) of CGST Rules, 2017 - purchase of used / second-hand gold jewellery or ornaments from persons who are not registered under GST and that at the time of sale of such goods there is no change in the form/nature of such goods - ITC also not be availed on such purchase. HELD THAT - If the consumer behaviour related to gold purchase/holding in India is examined, one can safely conclude that marginal utility derived from purchasing and holding gold and gold products never diminishes. It either increases or remain same - In India, gold jewellery is transferred from generation to generation as part of family traditions. Possession of old gold jewellery is also a matter of family prestige in many parts of India. If gold jewellery gets older say 50 to 100 years, it becomes vintage jewellery and if it is more than that, say more than 100 years, it becomes antique jewellery. Needless to say that both categories are costlier. It is also worth mentioning that normally, value of gold will not diminish even if it is exchanged among 10 different users in a span of 2 years as a jewellery piece of 22 carats remains 22 carats even after changing hands. Given the daily market price; Content, Carat (purity) and fineness determine the value of gold jewellery and not the duration of use or holding. Since the duration of use does not affect the value of the commodity in question, the concept of depreciation is not applicable in the case of gold and gold jewellery. By the same logic, dealing with exchange of gold cannot be construed as dealing in second hand goods and the rule 32 (5) is not applicable and Section 15 of the CGST Act 2017, holds good. In the case of usual goods, the peak value in its life span will normally be at the point of retail primary sales to end customers. Such goods will suffer tax at all the value addition points till the peak of its value, i.e., up to the retail sales to the end consumer. The intention of Sub rule (5) to Rule 32 of the CGST Rules, 2017 is to reduce the tax burden on such goods, which have already suffered tax on its highest value, when supplied at a reduced price in the secondary market after usage. But this is not the case with goods such as gold and gold ornaments, where the value is determined primarily by the content, purity and fineness of the material contained therein - the term second hand does not hold any meaning when it comes to items such as gold, land, currency etc. In order to qualify for inclusion under the valuation of supply as envisaged under sub-rule (5) of rule 32, it has to be proved that the applicant is dealing in second-hand goods. Unfortunately, gold in any form fails to pass the test of second-hand goods . Thus, the supply made by the applicant fails to comply with all the requirements specified under Rule 32 (5) of the CGST, Rules 2017. Hence cannot avail of the benefit of provisions stated under sub-rule (5) of CGST rules 2017.
Issues Involved:
1. Applicability of Rule 32(5) of CGST Rules, 2017 for determining the value of supply of used/second-hand gold jewellery. 2. Eligibility of the applicant to adopt the margin scheme for the determination of the value of supply of old/used/second-hand jewellery. Detailed Analysis: Issue 1: Applicability of Rule 32(5) of CGST Rules, 2017 Applicant's Contentions: - The applicant, engaged in buying and selling old/used/second-hand gold jewellery from unregistered persons, sought clarification on whether GST should be paid only on the difference between the selling price and purchase price as per Rule 32(5) of CGST Rules, 2017. - The applicant argued that the ornaments are sold "as such" without altering their nature, except for minor cleaning and polishing. - They contended that since no Input Tax Credit (ITC) is availed on these purchases, they should be eligible to determine the value of supply based on the margin scheme as per Rule 32(5). Legal Provisions Discussed: - Section 15 of CGST Act, 2017: Deals with the value of taxable supply. - Rule 32(5) of CGST Rules, 2017: Specifies that for second-hand goods, where no ITC has been availed, the value of supply shall be the difference between the selling price and purchase price. Applicant's Interpretation: - The applicant interpreted "second-hand goods" based on dictionary meanings and argued that since they comply with the conditions under Rule 32(5), they should be eligible for the margin scheme. - They further cited various judicial precedents and advance rulings supporting their interpretation. Authority's Examination: - The Authority examined whether gold, as a commodity, changes value when ownership changes. - It was noted that gold retains its value regardless of ownership changes and does not depreciate like other second-hand goods. - Gold's value is determined by content, purity, and fineness, not by the duration of use or the number of times it changes hands. Authority's Conclusion: - The Authority concluded that since gold does not depreciate and its value is not affected by ownership changes, it does not qualify as "second-hand goods" under Rule 32(5). - Therefore, the applicant cannot determine the value of supply based on the margin scheme as per Rule 32(5). Issue 2: Eligibility to Adopt the Margin Scheme Applicant's Arguments: - The applicant argued that they are a dealer in the secondary market and purchase gold from unregistered persons, making them eligible for the margin scheme. - They emphasized that the intention of Rule 32(5) is to reduce the tax burden on goods that have already suffered tax on their highest value. Authority's Analysis: - The Authority analyzed that the value of gold is determined by its content and purity, not by its usage or ownership history. - It was highlighted that gold's value often increases over time, contrary to the usual depreciation seen in second-hand goods. Authority's Conclusion: - The Authority concluded that the concept of "second-hand goods" does not apply to gold, and therefore, the applicant cannot avail the benefits of the margin scheme under Rule 32(5). Ruling: Question: Whether GST is to be paid only on the difference between the selling price and purchase price for used/second-hand gold jewellery as per Rule 32(5) of CGST Rules, 2017? Ruling: The applicant cannot determine the value as per Sub Rule 5 of Rule 32 of the CGST Rules, 2017 for the supplies mentioned in the question.
|
