GST on Sale of Ancestral Paintings, Goods and Services Tax - GST

[deepak gulati]

An unregistered salaried person is selling his Ancestral Paintings for Rs. 45 lakhs in the open market.

The question is whether GST will be leviable on these paintings or not.

Posts / Replies

[Sadanand Bulbule]

Dear 

Looking at the situation explained by you, even such person does not fall under the category of " casual taxable person" which is defined as under:

Section 2(20) “casual taxable person” means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business;

Reading by the above definition, essentially such transactions should be in the course or furtherance of business. Obviously this essentiality is missing here. Therefore in my opinion , sale of ancestral paintings for Rs. 45 lacs is not taxable. Still double check with experts.

[KASTURI SETHI]

Dear Querist,

                 (i)  The unregistered salaried person's  transaction is out of the definition and scope of the term, 'business' as defined under Section 2 (17) of CGST Act, 2017. That person is not engaged in purchase  and sale of old and used paintings or antique works of art. Hence GST is not leviable. Old and used paintings are classified under 9701  (HSN) 

                 (ii)  Hence I support the views of Sh.Sadanand Bulbule, Sir.

                (iii) For more knowledge of the issue, please  go through the following decision of AAR, Maharashtra :-

2022 (67) G.S.T.L. 498 (A.A.R. - GST - Mah.)

BEFORE THE AUTHORITY FOR ADVANCE RULING UNDER GST, MAHARASHTRA

S/Shri Rajiv Magoo, Member (Central Tax) and T.R. Ramnani, Member (State Tax)

IN RE : SAFFRON ART PVT. LTD.

Order No. GST-ARA-51/2020-21/B-62/Mumbai, dated 20-5-2022 in Application No. 51

GST : Second-hand paintings or used paintings are classifiable under Heading No. 9701 of GST Tariff, liable to 12 per cent GST GST : Provisions of Rule 32(5) are applicable for determining tax liability of second-hand paintings or used paintings

Second-hand paintings - Heading No. 9701 - Classification - Applicant is involved in procuring paintings and selling same by auction - Issue of classification is settled in case of Astaguru Auction House (P.) Ltd., 2022 (62) G.S.T.L. 99 (A.A.R. - GST - Mah.) - Following same it is to be held that second-hand paintings or used paintings are classifiable under Heading 9701 of GST Tariff, GST is payable at 12% in terms of entry at Sl. No. 236 of Notification No. 1/2017-C.T. (Rate). [para 5.3]

Valuation (GST) - Second-hand paintings - Applicant is involved in procuring paintings and selling same by auction - Advance ruling is sought on whether liability to pay tax on second-hand or used paintings is to be determined in terms of Rule 32(5) of Central Goods and Services Tax Rules, 2017 - HELD : Similar issue is settled in case of Astaguru Auction House (P.) Ltd., 2022 (62) G.S.T.L. 99 (A.A.R. - GST - Mah.) - Applicant is buying second hand paintings and selling same without availing input tax credit on purchases of such paintings, provisions of Rule 32(5) ibid. are applicable - Rule 32(5) ibid - Rule 32(5) of Maharashtra Goods and Services Tax Rules, 2017. [paras 5.3 & 5.4]

Ruling in favour of assessee

CASE CITED

Astaguru Auction House Pvt. Ltd. — 2022 (62) G.S.T.L. 99 (A.A.R. - GST - Mah.) — Followed [Para 5.3]

[Order]. - Proceedings : The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s. Saffron Art Private Limited the applicant, seeking an advance ruling in respect of the following questions.

(1)     Classification of second-hand or used ‘Paintings’ [Section 97(2)(a)]

(2)     Whether for determination of the liability to pay tax on the sale of second hand or used ‘Paintings’, the applicant can apply Rule 32(5) of CGST & MGST Rules, 2017?

At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression ‘GST Act’ would mean CGST Act and MGST Act.

2. Facts and contention - As per the applicant

2.1 M/s. Saffron Art Private Limited, the applicant, registered under GST Act vide GSTN 27AAHCS0308R1ZZ, procure ‘Paintings’ on approval basis from unregistered and registered persons and sells the same by auction to the highest bidder.

2.2 Applicant displays the ‘Paintings’ on its website and conducts a sale thereof by way of online auction, to highest bidder. Assumption of the applicant is that its suppliers have brought the ‘Paintings’ second-hand or used, and then offered for sale to applicant. Thereof, for determination of the liability to pay tax on the sale of second-hand or used ‘Paintings’ the Applicant can apply Rule 32(5) of CGST & MSGST Rules, 2017 and pay tax on difference between selling price and purchase price as prescribed by the aforesaid Rules.

2.3 Presently, the applicant is charging CGST @ 6% and MSGST @ 6% on the entire price for which the second-hand or used ‘Painting’ is sold.

B. Statement containing applicant’s interpretation of law and/or facts

2.4 Applicant purchases and sells second-hand or used ‘Painting’. No ITC is being availed on the purchase of such ‘Paintings’. Therefore Rule 32(5) of CGST & MSGST Rules, 2017 is applicable to sale of such ‘Paintings’ and tax shall be paid by the applicant on the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored.

2.5 According to applicant, Schedule II Entry No. 236 Chapter Heading 9701 covers “Paintings’ drawings and pastels executed entirely by hand, other than drawings of Heading 4906 and other than hand-painted or hand-decorated manufactured articles, collages and similar decorative plaques”. Therefore, the second hand or used ‘Paintings’ sold by the applicant will attract tax at the rate specified by Schedule II-Entry No. 236 Chapter Heading 9701.

3. Contention - As per the concerned officer :

The jurisdictional officer has submitted reply dated 27-4-2022 which is taken on record and considered.

4. Hearing

4.1 Preliminary e-hearing in the matter was held on 7-12-2021. The Authorized representative of the applicant, Shri Deepak Bapat, Advocate, was present and made submissions for admission of the subject application. Jurisdictional officer Shri Chandrashekhar Thakur, Deputy Commissioner, MUM-VAT-E-647, LTU-04 was also present. The jurisdictional officer was directed to file written submission within a weeks’ time.

4.2 The application was admitted and called for final e-hearing on 26-4-2022. The Authorized representative of the applicant, Shri Deepak Bapat, Learned Advocate was present. The Jurisdictional officer, Shri Chandrashekhar Thakur, DC, MUM-VAT-E-647, LTU-04 was also present. The jurisdictional officer was once again directed to file written submission within two days. We heard both the sides.

5. Observations and findings :

5.1 We have gone through the facts of the matter, documents on record and submissions made by the applicant.

5.2 The applicant has submitted that they purchase and sell second hand or used ‘Painting’ and do not avail ITC on the purchases of such ‘Paintings’. Therefore, according to the applicant, the provisions of Rule 32(5) of CGST & MSGST Rules, 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.

5.3 In an earlier case decided by this Authority on an application filed by M/s. Astaguru Auction House Private Limited, this office vide Order No. GST-ARA-40/2020-21/B-27, dated 8-3-2022 [2022 (62) G.S.T.L. 99 (A.A.R. - GST - Mah.)] has held that Paintings are 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.

5.4 We have no reason to deviate from the said ruling 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.

6. In view of the above discussions, we pass an order as under :

ORDER

7. For reasons as discussed in the body of the order, the questions are answered thus -

Question 1 :-	Classification of second-hand or used ‘Paintings’ [Section 97(2)(a)]
Answer :-	The ‘Paintings are classifiable under Heading 9701 of the GST Tariff.
Question 2 :-	Whether for determination of the liability to pay tax on the sale of second-hand or used ‘Paintings’, the applicant can apply Rule 32(5) of CGST & MGST Rules, 2017?
Answer :-	Answered in the affirmative. The provisions of Rule 32(5) of CGST Rules will be applicable to applicant in respect of second- hand i.e. used paintings which are purchased by them and then sold.

 

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