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TMI Blog2023 (7) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naments purchased will be sold as such to the end consumers without making any further processing, in other words, sold in the same form in which the ornaments were purchased, to another registered or unregistered person, except for some minor processing in the form of cleaning and polishing but without altering the nature of such ornament/jewellery. It is further submitted that since the applicant had purchased the old/used/second-hand gold ornaments/jewellery predominantly from unregistered persons there is no scope for availing of the input tax credit as per Section 16 of the CGST Act. Presently, the applicant is charging GST at the rate of 3% on the entire consideration received from the customers on account of the sale of such old/used/second-hand gold ornaments/jewellery. The applicant based on the facts discussed above required clarification to determine the value of supply as per Sec. 15(5) of Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act, 2017) read with Rule 32(5) of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as CGST Rules, 2017). Generally, Sec. 15 of the CGST Act deals with the value of the supply of goods or se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been owned by someone else (Collins Dictionary) ii. having had a previous owner; not new (English Oxford dictionary) iii. not new; having been used in the past by someone else (Cambridge English Dictionary) iv. acquired after being used by another (Merriam Webster) v. previously used or owned (Dictionary.com) Used goods:- i. already owned or put to a purpose by someone else; not new (Cambridge Dictionary) ii. that has endured use (Merriam Webster) 4.4. Further it is also submitted that it is settled jurisprudence that when the words of a statute are clear, plain, and unambiguous, i.e., they are reasonably susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences. Moreover, if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to explicate those words in their natural and ordinary sense. This rule of interpretation is followed in a plethora of judgments. A few of the judgments are as under: Nelson Metis Vs. Union of India (AIR 1992 SC 1981) = 1992 (9) TMI 355 -SC Gurudevantt VKSSS Maryadit Vs. State of Maharashtra ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cides to sell it, such goods enter the secondary market either as used goods or as second-hand goods. The applicant is one such dealer in the secondary market procuring second-hand or used jewellery or gold ornament from unregistered persons or end users. 4.7. Further it is also submitted that if Rule 32(5) is being interpreted to take a view that Rule 32(5) applies only to the said of goods, which are purchased on payment of GST and where credit of such tax is not availed. This interpretation will make Rule 32(5) redundant in the majority of transactions as such second hand or used goods are normally purchased, from individuals not liable to tax as such goods are not sold by them in the course or furtherance of business. If this interpretation is taken, most of the dealers in second-hand goods will not be entitled to take valuation as prescribed under Rule 32(5) of the CGST Rules. This will defeat the very purpose of the legislation. 4.8. Moreover, second-hand goods when it is purchased for the first time from the primary market would suffer the levy of indirect tax i.e., VAT, GST, etc. It, therefore, means that when the tax is paid on the margin on the sale of second hand g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory for the assessee as well as tax authorities to follow it in letter and spirit, irrespective of revenue considerations. Once the goods are second-hand or used goods, Rule 32(5) is applicable irrespective of the value of such goods and irrespective of the nature of such goods. 4.12. In the backdrop of the above discussions, since the applicant has fulfilled all the conditions specified in Rule 32(5) of the CGST Rules, the applicant is stating that, the applicant is very much eligible to adopt the margin scheme for the determination of the value of supply of such old / used / second-hand jewellery and thereby they can arrive at the value of such goods are supplied and the price at which the goods are purchased. If there is no margin, no GST is charged for such supply. Further the applicant submits that their view was based on the decision of various authorities for advance ruling in the following cases having similar issues: i. M/s, Attica Gold Pvt. Ltd. [2020 (4) TMI 690 - AAR, Karnataka] KAR ADRG 15/2020 ii. M/s. Aadhya Gold Pvt. Ltd. [2021 (7) TMI 548 - AAR, Karnataka] KAR ADRG 35/2021 iii. M/s. Safset Agencies Pvt. Ltd. [2019 (6) TMI 822 - AAR, Maha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time being in force other than this Act, the Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017) and the Goods and Services Tax (Compensation to States) Act, 2017 (Central Act 15 of 2017) if charged ? separately by the supplier; b. any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; c. incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply arid any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; d. interest or late fee or penalty for delayed payment of any consideration for any supply; and e. subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation : - For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. 3. The value of the supply shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.4. Given the context, it will be appropriate to analyse gold as a commodity which has universal usage. It is pertinent to note that all most all central banks hold and manage gold in their foreign reserves portfolios. It played a dominant role in the international monetary system when currency rates were linked to the price of gold. Though the fixed currency system ended in 1973, diminishing gold s role, it still remains as an important reserve asset. Coming to retail gold, as per World Gold Council, retail gold is global - with private investors holding approximately 45,000 tonnes of gold in bars and coins (that s around 22% of all the gold mined throughout history) . In the present scenario, where global economic outlook is not that optimistic, gold is faring better that any other investment instruments and its market price is steadily increasing day after day. As per Indian income tax laws, profit realized on the sale of gold and gold products are treated as Capital gains which are taxable. These aspects which are very well known to the public are scripted once again to bring out the unique nature of gold. It is more than a usual commodity which is brought from the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old 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 . 7.9. 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. In view of the observations stated above following rulings are issued RULING Question : In case the applicant has purchased used/ second-hand gold jewellery or ornaments from persons who are hot registered under GST and that 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, if so the case, 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? Ruling : In view of the foregoing reasons, the applicant cannot determine the value as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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