GST on Sale of Used Goods!

GST on Sale of Used Goods!

GST on Used Goods

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GST provides for special treatment to used or second-hand goods being goods used as such or after such minor processing which does not change the nature of the goods. CGST Rules provide for adopting the marginal scheme in the valuation of supplies. However special tax rates are not specified for such goods except for used vehicles issued vide a separate notification.

Valuation of second-hand goods sold by a dealer of such goods:

the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. Accordingly, rule 32(5) of CGST Rules 2017 prescribes the manner for determination of the taxable value of second-hand goods i.e used goods as such or after such minor processing which does not change the nature of the goods. 

Supply goods under GST can be of Fresh Goods and Used (Second Hand) Goods. For the purpose of taxability under GST and ease of understanding, Second Hand Goods are further bifurcated as follows: Motor Vehicle and Other than Motor Vehicle. Motor Vehicles include cars, trucks, vehicles used to the transportation of goods and other passenger vehicles.

Conditions to be fulfilled for adopting the above valuation

1. Applicable to persons dealing in buying and selling of second-hand goods
2. Input credit is not availed on the purchase of the goods which are sold.

Rate of GST of used goods :

The rate of GST of used goods shall be the same rate which is applicable if the goods were first sold after its manufacture. 

*The margin scheme was implemented for a dealer dealing in second-hand goods who do not claim ITC on the goods purchased and who sells the goods as such or after minor processing which does not change the nature of the goods. 

Exemption from reverse tax for second-hand:

1. Buyer is a registered supplier dealing in buying and selling of second-hand goods
2. Buyer and seller are located in the same state
3. Goods being purchased are Second-hand goods
4.  A supplier is an unregistered person
5. The buyer is paying tax on supplies valued at sales price minus purchase price adopting Rule 32(5) of the CGST Rules 2017.