The difference between the buying price and the selling price of second-hand jewellery will constitute the amount for levying Goods and Services Tax, according to Karnataka’s Authority for Advance Ruling (AAR) (GST).
This judgement, according to experts, will provide a great deal of clarity on taxation and will also benefit buyers.
Aadhya Gold Private Limited, situated in Bengaluru, is involved in the process of buying and selling second-hand gold jewellery to the general public.
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After basic processing such as clearing and polishing, jewellery is sold to another registered person in the same condition as when it was first purchased. On the full consideration received from the purchasers, the applicant levies GST at a rate of 3% (CSGT and SGST at 1.5%) to the buyers. He also stated that no input tax credit (ITC) is available because the purchase was made by an unregistered individual.
Advance ruling
In light of these circumstances, the applicant requested an advance judgement on whether GST should be paid merely on the difference between the selling and purchase prices. He alluded to CGST Rule 32(5), which states that “Where a taxable supply is provided by a person dealing in buying and selling of second-hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored.”
The AAR looked into two issues: whether the supply is taxable and if the supplier is involved in the acquisition and selling of used items.
For the first requirement, the authority noted that the applicant is making a supply of used jewellery, which is subject to a 3% GST rate.
For the second requirement, the authority reviewed the applicant’s submissions, which said that he is merely cleaning and polishing the old jewellery rather than melting it to convert it to bullion and then remaking it into new jewellery. After that, the products are given to the other individual. In addition, the petitioner stated that the commodities are being invoiced as “used gold jewellery.”
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AAR said both the conditions have been satisfied, so the “valuation of supply of second-hand jewellery may be made as prescribed in sub-rule (5) of rule 32 of CGST Rules 2017.”
“Jewellery being a high-value item, will be freed from a large component of GST which was a double whammy for the jewellery buyers. This ruling would also mean that jewellery will practically suffer a single stroke of taxation on the first point of sales if the form of such jewellery remains unfettered,” said by one expert.
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