Margin scheme of GST applicability?
This query is : Resolved
Dr. ShamsheerKhan
(Querist)
01 October 2017
Shall a person opt for Margin scheme of GST if he only deals with Scrap-an end product which can be recyclable.
CA Rashmi Gandhi
(Expert)
01 October 2017
Yes you can......
Dr. ShamsheerKhan
(Querist)
01 October 2017
A margin scheme registered person liable to pay GST on his inwards or not?
Please explain margin scheme to the extend to understand.
CA Rashmi Gandhi
(Expert)
01 October 2017
Introduction
Whenever there is a transaction of supply, you have to pay GST. However, when you talk about second-hand goods, then you are allowed to pay tax on only the margin. Margin Scheme basically tells us about the difference between the value at which goods are being supplied and purchase value. No GST will be charged if there is No Margin. By the help of this scheme one can avoid double taxation.
Valuation under Margin Scheme
Whenever a taxable supply is provided by a person who is dealing in second-hand goods (margin scheme),
if there is no change in the nature of goods; andwhere no input tax credit is availed for such goods
then the value shall be the difference between the selling price and the purchase price (Margin). If the value of such supply is negative then it can be ignored.
Exemption
Moreover, Notification No. 10/2017-Central Tax (Rate) New Delhi (dated 28th June, 2017) exempts the Intra-State supplies of second hand goods received by a registered person who
is dealing in buying and selling of second hand goods (margin scheme); andwho pays the tax on the value of outward supply of such second hand goods as determined above.
Example
A company XYZ Pvt Ltd deals in selling and buying of second-hand cars. The company purchases a second-hand car from an unregistered person worth Rs. 8 lakhs and the original price of the car was Rs.10 lakhs. The same car is sold by the company for Rs. 11 lakhs after minor refurbishing. GST shall be levied on the supply of car by the company to its customer for Rs. 11 lakhs and Supply of the car to the company for Rs. 8 lakhs shall be exempted. The value for GST purpose shall be Rs. 3 lakhs.
If any kind of value added by the way of repair, refurbishing, reconditioning etc., the same shall also be added to the value of goods and be part of the margin. The person selling the car to the company will not be required to charge tax or issue any tax invoice and the company purchasing the car cannot claim any ITC.
Whenever there is a transaction of supply, you have to pay GST. However, when you talk about second-hand goods, then you are allowed to pay tax on only the margin. Margin Scheme basically tells us about the difference between the value at which goods are being supplied and purchase value. No GST will be charged if there is No Margin. By the help of this scheme one can avoid double taxation.
Valuation under Margin Scheme
Whenever a taxable supply is provided by a person who is dealing in second-hand goods (margin scheme),
if there is no change in the nature of goods; andwhere no input tax credit is availed for such goods
then the value shall be the difference between the selling price and the purchase price (Margin). If the value of such supply is negative then it can be ignored.
Exemption
Moreover, Notification No. 10/2017-Central Tax (Rate) New Delhi (dated 28th June, 2017) exempts the Intra-State supplies of second hand goods received by a registered person who
is dealing in buying and selling of second hand goods (margin scheme); andwho pays the tax on the value of outward supply of such second hand goods as determined above.
Example
A company XYZ Pvt Ltd deals in selling and buying of second-hand cars. The company purchases a second-hand car from an unregistered person worth Rs. 8 lakhs and the original price of the car was Rs.10 lakhs. The same car is sold by the company for Rs. 11 lakhs after minor refurbishing. GST shall be levied on the supply of car by the company to its customer for Rs. 11 lakhs and Supply of the car to the company for Rs. 8 lakhs shall be exempted. The value for GST purpose shall be Rs. 3 lakhs.
If any kind of value added by the way of repair, refurbishing, reconditioning etc., the same shall also be added to the value of goods and be part of the margin. The person selling the car to the company will not be required to charge tax or issue any tax invoice and the company purchasing the car cannot claim any ITC.
Dr. ShamsheerKhan
(Querist)
01 October 2017
Scrap (end product which can be recyclable) falls under the meaning of second hand goods or not?
CA Rashmi Gandhi
(Expert)
01 October 2017
If you purchase old goods then only
Dr. ShamsheerKhan
(Querist)
01 October 2017
News papers/ waste paper records of office/ plastic scrap/ iron scrap. Does these are you mean by second hand?
CA Rashmi Gandhi
(Expert)
01 October 2017
Yes............
31 October 2026
Scrap such as waste paper or iron scrap is generally not 'second-hand goods' under Rule 32(5), as it is sold as waste for recycling rather than used as such, so GST applies on full value; also, from 10 October 2024 metal scrap bought from unregistered persons attracts RCM, and registered suppliers of metal scrap suffer 2% TDS u/s 51.
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