As per the GST law, GST is charged on the transaction value of the goods. However, in the case of GST on second hand goods, a person dealing in such goods is allowed to pay tax on the margin amount. In brief, this margin is the difference between the price at which the goods are supplied and purchased. In this article, we will explain the ‘Margin Scheme’ in GST and also about GST on second hand machinery notification.
Under the Margin Scheme (in GST), a taxpayer, who opts for this scheme, is allowed to pay GST on the margin amount on GST on sale of second hand goods, i.e. the difference between the value at which the goods are supplied and the price at which the goods are purchased. However, If there is no margin or negative margin, no GST is charged. The purpose of the margin scheme under GST is to avoid double taxation. In this case, the goods would have borne the incidence of tax before they re-enter the supply chain when it comes to GST on second hand goods notification.
As per Rule 32(5) of the CGST Rules, 2017, for a GST registered person who deals in sale of second hand goods GST.
The value of supply will be the difference between the selling price and the purchase price. However, when the value of such supply is negative, it will be ignored. Often people asks is there GST on second hand goods *Here, second-hand goods or GST on used goods include:
Example: M/s ABC Ltd (Mumbai) which deals in buying and selling second-hand cars, purchases a second-hand car (Original price INR 5,00,000) for INR 3,00,000 from an unregistered person (located in Mumbai) and sells the same after minor furbishing for INR 3,50,000 to Mr. Z of Pune.
The value of the supply to calculate GST will be INR 50,000 (The difference between the selling and the purchase price for the company - 3,50,000 - 3,00,000). Note: When the margin scheme is opted for a transaction of second-hand goods, the person selling the car to the company will not issue any taxable invoice and the company purchasing the car can not claim any ITC.