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Second Hand Goods Market in India

Recently a survey has been revealed that the growing consumerism in India alongside the rising disposable income will see India's used goods market to rise to Rs. 1,15,000/- from the existing Rs. 80,000/- crore. there are huge market second hand or used goods in India, many of the traders are dealing with used goods for instance second hand car bazaar, mobile bazaar etc, person trends and preference has changed with fashion and technology, there are enormous amount of person in India who is passionate about new car, mobiles and technology earlier they were hesitant to sold their old product and buy new product with latest technology just because they were unable to fetch fair amount and often land on bad deal, this has given an opportunity for the emergence of second hand goods market because they helps the seller to crack good deal by opening flood gate of buyer before seller through online portal, thus seller has fair amount of option available in hand to deal with different buyers on online portal, thus saving sellers efforts and time, but on dealing with such transaction buyer has to pay tax on the entire value of transaction which is often prove burdensome on the part of the purchaser and involve double taxation, therefore newly introduce Goods & Service Tax Act has taken the matter double taxation seriously and progressively brought before great solution.


Generally Good and service tax is levied the transaction value of the goods i.e. sale or purchase amount, however with respect to used or second hand goods, the person dealing with such goods has been allow to pay tax on the margin only, i.e. the difference between the amount at which goods are purchased and at which goods supplies later. If the supplies of those particular goods fetch no profit or margin, thus no GST would require to be paid on such transaction. The purpose of that scheme is to avoid the incidence of double taxation which is a welcome initiative.

Legal Provision of Margin Scheme

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 a 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.

In this regard, Notification No.10/2017-Central Tax (Rate) New Delhi, dated 28th June, 2017 exempts intra-State supplies of second hand goods received by a registered person, dealing in buying and selling of second hand goods and who pays the central tax on the value of outward supply of such second hand goods as determined under sub-rule (5) of rule 32 of the CGST Rules, 2017, from any unregistered supplier, from the whole of the central tax levied under the CGST Act, 2017. Similar exemptions are also there in respective SGST Acts.


Let us take an example of M/s S Ltd., a company engaged in the business of buying and selling of second hand machinery, suppose on 5th of March,2018 a company purchase printing machine and flour grinding machine at the price of Rs 3 lakhs and 1.5 lakhs respectively, on 13th of March, 2018 a company sold printing machine to Mr. X at the price of Rs. 3 lakhs and Flour Grinding Machine Mr. Y at the price of Rs 1.8 lakhs, thus company would require to pay no GST in case of printing machine because no profit or margin has arises, on the other hand on the sale of Flour Grinding machine company now required to pay GST on the margin of Rs. 30,000/- (Rs 1.8 lakhs - Rs. 1.5 lakhs) at applicable rate.


Keeping in mind the enormous market of second hand and used goods, the scheme would prove to be a milestone and help to give boost to second hand goods market in India, This scheme would also help to avail second hand goods at low price and banish the impact of double taxation.


Readers are advised not to get confused second hand goods and used goods with scraps, there is a separate rates applicable on the buying and selling of scraps under goods and service tax act.

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Published by

CS Udbhav
(compliance officer)
Category GST   Report

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