Sale of Second hand goods under GSTadmin
While GST is charged on transaction value under a normal supply. For a second hand supply, GST would be applicable only on the margin i.e. the difference between the value of sale and purchase price. If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation as the goods, having once borne the incidence of tax, re-enter the supply and the economic supply chain.
Valuation of second hand goods
Second hand goods are those goods which are used goods as such or goods which are sold after such minor processing which does not change the nature of the goods.
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.
For instance, a company say M/s FirstSource Ltd, which deals in buying and selling of second hand cars, purchases a second hand Maruti Celerio Car of March, 2014 make (Original price Rs. 5 lakhs) for Rs. 3 lakhs from an unregistered person and sells the same after minor furbishing in July, 2017 for Rs. 3,50,000/-. The supply of the car to the company for Rs. 3 lakhs shall be exempted and the supply of the same by the company to its customer for Rs. 3.5 lakhs shall be taxed and GST shall be levied. The value for GST purpose shall be Rs. 50000/-, i.e.the difference between the selling and the purchase price of the company.
In case any other value is added by way of repair, refurbishing, reconditioning etc., the same shall also be added to the value of goods and be part of the margin.
If margin scheme is opted for a transaction of second hand goods, the person selling the car to the company shall not issue any taxable invoice and the company purchasing the car shall not claim any ITC.