A person dealing in second hand goods ( Margin Scheme) [Rule 32(5) of CGST Rules]
Valuation / Value of Supply – GST Ready Reckoner
GST
Margin Scheme in GST
Normally GST is charged on the transaction value of the goods. However, in respect of second hand goods, a person dealing is such goods may be allowed to pay tax on the margin i.e. the difference between the value at which the goods are supplied and the price at which the goods are purchased. 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 [Rule 32(5) of the GST Rules, read along with Notification No.10/2017-Central Tax (Rate), date 28 Jun 2017]
* The taxable value of supply of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of goods shall be the difference between t
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in second hand goods and paying tax under margin scheme is not liable to pay tax on reverse charge basis on procurement of such goods from unregistered persons.
* Example :- Mr. Ramesh sells its old car to Sai Motors, who is dealing in old cars for Rs. 4.00 lakhs. Sai motors resells it for Rs. 4.70 Lakhs to Mr. B. value of supply in this case would be 0.70 lakhs . Further, XYZ is not required to pay tax on reverse charge on purchase of car from unregistered Mr. Ramesh, since the activity is exempt from GST.
Value of supply of goods repossessed from a defaulting borrower.
* If the defaulting borrower is not a registered person, the purchase value will be purchase price in the hands of such borrower reduced by 5% points for every quarter or part thereof, between the date of purchase and date of disposal by the person making such repossession.
* In other word value of supply = Selling price – (purchase price of defaulting borrower – 5% per quarter or part thereof From the date of p
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uti Celerio Car of March, 2022 make (Original price ₹ 5 lakh) for ₹ 3 lakhs from an unregistered person and sells the same after minor furbishing( repair cost 20,000/-) in July, 2022 for ₹ 3,50,000/-. The company does not avail any ITC.
what will be value of supply if car sold after minor furbishing ( repair cost 20,000/-) in July, 2022 for ₹ 2,50,000/-?
In this case
* The value of supply of services for GST purpose shall be ₹ 50000/-, i.e. (3,50,000 – 3,00,000) the difference between the selling and the purchase price of the company.
* The value of supply of services for GST purpose shall be ₹ NIL, i.e. (3,00,000 – 2,50,000) 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
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