Everything About Second-Hand Goods Under GST

Buying & selling of second-hand goods & used goods will not attract GST if it is sold at a price cheaper than the purchase price.

Where a taxable supply is provided by an individual dealing in buying & selling of second hand goods or used products as such or once such minor processing that does not modify the nature of the goods & where no input tax credit has been availed on the purchase of such goods by the dealer, 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 neglected. This is known as the margin scheme. In case the value determined is negative goods are sold at loss then tax will not be payable.

Rule 32(5) of the CGST Rules is a subrule indicating about the persons Buying & selling second-hand goods (for example used cars, mobiles & other electronic products).

Thus, Margin Scheme can be availed only by a registered person dealing in Buying & selling of second-hand goods & who satisfies the conditions as mentioned in Rule 32(5) of the CGST rules.

The government notification exempts from levying CGST on Intra-state supplies of second-hand goods received by a Registered person dealing in Buying & selling of used products, who pay central tax on the value of outward supply of such goods from any supplier, who is not registered.

The Finance Ministry further stated that this has been done to avoid double taxation on the outward supplies created by such registered person since such a person in operation under the Margin scheme cannot avail input tax credit on the purchase of the second-hand product.

FOR EXAMPLE –

Mr. C is a Dealer in second-hand goods or used products. He purchases a smartphone for Rs. 10,000, after Minor processing, he sells the same smartphone for Rs. 15,000, issuing a GST Invoice, assuming 18% as the tax rate.

He may claim the Margin Scheme. According to the scheme, GST must be paid on the difference between the purchase price & sale price i.e. 18%*[15,000-10,000] = 900.

Hence, GST paid is Rs. 900.

If any second-hand goods dealer receives goods from an unregistered dealer, intrastate supplies, then no GST must be paid under the Reverse Charge Mechanism.

A registered dealer shall issue the Tax Invoice separately stating the tax items in the invoice. In case of an unregistered dealer, he shall issue Bill of supply instead of a Tax Invoice.