Margin Scheme for Second Hand gold Jewelers is explained in the article below in most simplified manner for ease of understanding for all such Second hand gold Jewelers and professionals. Please note all the updated till Nov’22 have been incorporated in the detailed article below. A recent Judgement of Karnataka AAR can be very beneficial for Second hand gold Jewelers which will be discussed in the article below.
The article was based on study of CBIC article on Margin Scheme under GST, refer link >> https://www.cbic.gov.in/resources//htdocs-cbec/gst/51_GST_Flyer_Chapter30.pdf
Also refer GST Sectoral Series on Gems & Jewellery by CBIC >> https://www.cbic.gov.in/resources//htdocs-cbec/gst/sectoral-faq-gems-jewellery.pdf
What is Margin Scheme for Second Hand gold Jewelers?
GST is levied on Transaction Value normally, but in case of Second Hand goods, a person is allowed to levy tax on the Margin Amount i.e. difference between Resale Value and Purchase Value. If no margin, no need to levy GST.
The purpose of the Margin Scheme is to avoid double taxation on the goods as they have already borne incidence of tax, as they are re-entering the supply chain.
Valuation under Margin Scheme for Second Hand gold Jewelers?
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.
The proviso to the above rule further provides that in case of the purchase value of goods repossessed from an unregistered defaulting borrower, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.
Applicable Rates under Margin Scheme for Second Hand gold Jewelers?
For the following category of gold jewellery, GST rate is charged as per Notification No. 11/2017 -Central Tax (Rate) :
| DESCRIPTION OF GOODS | SGST | CGST |
|---|---|---|
| Services by way of job work in relation to- Cut and polished diamonds; precious and semi-precious stones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) (JOB WORK IN RELATION TO MAKING GOLD) | 2.5% | 2.5% |
Gold (including gold plated with platinum) unwrought or in semi manufactured forms, or in powder form, natural or cultured, whether or not worked or graded but not strung, mounted or set; pearls, natural or cultured, temporarily strung for convenience of transport (GOLD) | 1.5% | 1.5% |
For Notification No. 11/2017 -Central Tax (Rate) refer >> https://cbic-gst.gov.in/pdf/central-tax-rate/Notification11-CGST.pdf
Please note no Input Tax Credit on polishing/finishing/denting/painting can be obtained. However, Input Tax Credit is available for indirect expenses such as rent, insurance, professional fees, advertisement or any other expenses in course of business.
Availability of Input Tax credit for indirect expenses is also backed by Karnataka Authority of Advance Rulings for details refer >> https://gst.kar.nic.in/Documents/General/AtticaGoldprivatelimited31122.pdf
Practical difficulties while paying GST as per Margin Scheme for Second Hand Gold Jewelers
- Calculation of Margin is = Sales value – ( Purchase value + processing value ) or Margin = Sales Value – Purchase Value ?
- Is Margin so determined inclusive of GST? ( Eg : Margin Value = 1000 if inclusive of GST, then GST Amount is 1000*18/118 = 152.54 or Margin Value = 1000 if exclusive of GST, then GST Amount is 1000*18% = 180)
- GST Rate of 3% on Gold and 5% on making Charges, then in case of billing to end consumer whether on entire transaction value 3% will be charged or 3% on gold and 5% on making charges separately ?
Please note Intra State Supply of Second Hand Gold Jewelers is exempt from GST.
Need Expert Assistance for Margin Scheme for Second Hand Gold Jewelers in Udaipur and Rajasthan
For expert assistance on Margin Scheme for Second Hand Gold Jewelers and their GST Return filling in Udaipur and Rajasthan, reach our professionals at Tax Ledger Advisor.
Also refer article on GST Return filing from TaxLedgerAdvisor >> https://www.taxledgeradvisor.com/gst-return-filing/
Also refer article on GST Registration from TaxLedgerAdvisor >> https://www.taxledgeradvisor.com/gst-registration/
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