GST Margin Scheme - Second Hand Goods Supply in GST like Old Cars, Old Bikes, Old Mobiles, Old Jewellery, Old Empty Bottles etc.

1. Chakraborty Kapoor & Co. LLP
Cost & Management Accountants
Goods and Service Tax:
Margin Scheme in GST
CMA C.P. Kalra
CMAArunava Chakraborty
CMA Md. Rehan
Cost & Management Accountants
Email: info@cmackc.com
Contact No. 011-26275907
Chakraborty Kapoor & Co. LLP ©

2. Margin Scheme in
GST
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3. Why GST Margin Scheme?
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. GST Margin Scheme
is for those dealers who deals with the
purchase and sale of second hand goods.
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4. Types of Dealers
1. Dealers dealing in second hand goods purchase and
sales (Such dealers can take Margin Scheme)
2. Dealers helping in purchase and sale of second hand goods
for a commission or brokerage. (Such dealers cannot
take GST Margin Scheme)
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5. GST Rate for Margin Scheme
• GST Rate shall be the same rate which is leviable on supply
of new goods i.e. 5%, 12%, 18%, 28% and 3% on Jwellery.
• There shall be no difference in rate but valuation.
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6. Valuation of Second Hand Goods:
As per Rule 32(5) of the CGST Rules, 2017, 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.
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7. Lets take an example.
• ‘Mr. A’ a common man goes to a Jeweler to sell his gold chain say for Rs.
80000/-. Jweller buy that gold chain. And if the Jeweler sells that chain
to another common person ‘Mr. B’ say for Rs.90000/- the valuation
rules says that the value of such supply shall be Rs.10000/- and GST has
to be paid on Rs.10000/- which is 3% at present on jewelry.
• However if the Jeweler make processing in that chain and makes 6
rings rings and sells them say for Rs.20000 each then valuation under
this Rule shall not be applicable and Jeweler shall be considered to sell
new products for Rs.20000/- each and he shall have to pay tax on
whole of Rs.20000/- for every ring and not on his margin
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8. Notification issued by Government for GST
Margin Scheme
• Notification No.10/ 2017- Central Tax (Rate) dated 28.06.2017
exempts intra-State supplies of second hand goods received by a
registered person, dealing in buying and selling of second hand
goods and who pays the central tax on the value of outward
supply of such second hand goods as determined under sub-rule
(5) of rule 32 of the CGST Rules, 2017, from any unregistered
supplier, from the whole of the central tax levied under the CGST
Act, 2017. Similar exemptions are also there in respective SGST
Acts. Chakraborty Kapoor & Co. LLP ©

9. Now let’s understand this with an example
• For instance Mr. ‘A’ an unregistered common man goes to a Car
dealer ‘M/s ABC Ltd.’ to sell his second hand car for say Rs.
300000/-. (Original Price Rs. 500000/-)
• Now the M/s ABC Ltd. who is dealing in the second hand car
purchase and sales, sells the same car to another common man
say ‘B’ at Rs.350000/-. Now the rule says that the tax shall not be
paid on the full amount of Rs.350000/- but on the difference
between the selling and the purchase price i.e. (Rs.350000–
Rs.300000 = Rs.50000/-).
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10. Note That
• 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.
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11. So to some extent the government has given some
relaxation to the second hand goods industry
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12. Connect us
CMA C. P. Kalra
CMAArunava Chakraborty
CMA Md. Rehan
Chakraborty Kapoor & CO. LLP
Mob: +91-9911299105, +91-9990837823,
+91- 011-26275907
Email : cma.rehan@gmail.com
Website: www.cmackc.com
Address : F-1210, LGF, Chirtanjan Park, New Delhi, 110019