GST on Sale of second hand goods including car, laptops, old and used bottles – All about Margin scheme for second hand goods

 

1.0 Introduction

If you are dealer in second hand goods and you are still suspicious about the GST on second hand goods, then this article is for you. Since GST has been implemented from 1st July, 2017, people are very skeptical about its impact including, registrations, invoicing, valuation etc. Hence, we have written this article to cover all the GST aspects on sale of second hand goods.

Let us proceed on to discuss the related points on GST.

 

2.0 Valuation for second hand goods

As per the rule 32 of the CGST rules, the government has designed a margin scheme to find the valuation for second hand goods. As per the scheme, 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.

In simple word, selling price minus purchase price is known as margin scheme for second hand goods.

 

2.1 Conditions to avail the benefit of the scheme

There are two conditions to avail the margin scheme for GST which are as follows:

• Goods should be supplied as it is or after a minor processing which does not change the nature of goods.
• No input tax credit (ITC) should be availed on the purchase of such goods.

 

If both the above conditions are fulfilled then GST margin scheme can be availed.

 

2.2 Example on the GST margin scheme

Suppose, Mr. A deals in second hand laptops and he purchases the same at Rs.16,000. After minor processing, he supplies the laptop at Rs.20,000/-. He wants to issue the GST invoice. Kindly advice? Assume tax rate 18%.

Since, Mr. A is a dealer in second hand goods and hence he may claim the margin scheme. According to the margin scheme, GST has to be paid on the difference between purchase price and sale price.

Hence, total GST to be paid is Rs.720 [18%*(20,000 – 16,000)].

 

3.0 No Reverse charge even if purchases from unregistered dealer

If any second hand goods dealer deals receive goods from an unregistered dealer (intrastate supplies), then also, no GST is to be paid under reverse charge. This is due to government notification no.10/2017.

 

4.0 No GST if Purchase price is more than selling price

If for any reason, the purchase price is more than the selling price; in that case the negative figure is to be ignored and no GST shall be charged in that case.

 

5.0 GST registration for dealer of Second hand goods

GST registration for second hands goods dealer is mandatory if the total turnover in a state exceeds Rs.20 lakh. Further, the registration shall also be mandatory in the following cases:

• If supplying goods outside the state.
• If selling goods through ecommerce portal.

 

6.0 How to raise invoice in case of second hand goods?

If you are a registered dealer, then you shall issue the tax invoice stating the tax items separately in the invoice. If you are an unregistered dealer, then you may issue bill of supply instead of a tax invoice

Read: How invoicing is under GST

 

7.0 Composition scheme for Second hand goods dealer

If the total turnover is less than Rs.75 lakh, then the composition scheme can be availed by the dealer. Composition scheme is a benefit extended to small dealer to pay tax at a concessional rate with low compliances as compared to normal taxable person.

 

8.0 Can second hand goods dealer chose to pay tax normally and claim ITC

Yes, this is because margin scheme is only an option and hence, if the dealer wants to pay tax normally and claim ITC, then he can do it.

 

9.0 Conclusion

In case you have any query, kindly write to us at info@hubco.in.

 

Related Links:

• GST Registration
• GST Return Filings
• GST Software