AAR: GST to be paid only on margin earned on the resale of jewellery that is second-hand
The Karnataka AAR has ruled that jewellers will only have to pay GST on the profit made on the resale of second-hand gold jewellery. Aadhya Gold Private Ltd, based in Bengaluru, filed an application with the Authority for Advance Ruling seeking clarification on whether GST should be paid only on the difference between the selling and purchase price buys used/second-hand gold jewellery from individuals.
There is no change in the form of the goods at the time of sale. The AAR’s Karnataka bench determined that GST is only due to the difference between the sale price and the purchase price because the applicant was not melting the jewellery to turn it into bullion and then recreating it into new jewellery, but instead cleaning and polishing the old jewellery without changing its form.
According to experts, this decision will lower the GST required on the resale of used jewellery. Currently, the industry levies a three-percentage-point GST on the gross sale value obtained from the buyer.
According to AMRG & Associates Senior Partner Rajat Mohan, most jewellers buy outdated jewellery from ordinary people or unregistered sellers, obviating the need for the tax credit in the jeweller’s hands.
“The Karnataka AAR’s decision to impose GST only on the difference between the purchase price and the selling price will have a substantial impact on the industry in terms of lowering the tax cost to the final consumer,” Mohan continued.