Opinion requested for imposition of GST for Auction Sale of repossessed goods by bank of defaulting borrowers.
Under GST law, taxability of repo sales is governed by the provisions of rule 6(5) of the Valuation rules.
The Rules states as follow:
(5) 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 purchase of Such goods the value of supply shall be the difference between the selling price and purchase price and where the value of such supply Is negative it shall be ignored:
Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, 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.
Query 1. What is the date of purchase, whether it is the date of purchase made by the original loan defaulter, or the date on which possession Was taken by the bank?.
Query 2. In case of factory what is purchase date, will it be the date on which the factory is capitalized in the books of Accounts and /or Commercial production starts.
Query 3. In case of there is 2 factory together, what will be purchase date, whether it will be date when the final factory went into
Commercial production or it will calculate partly as per each factories commercial production.
Query 4. “Such minor processing which does not change the nature of the goods” is it include Factory structure / Built Plant and Machinery to scrap of Iron or Steel.?
But as per excise “Excise regime that have defined movable. Like Supreme Court in case of Municipal Corporation of greater Mumbai held “if article can be moved to another place as such without any dismantling then it is movable”. In Sirpur Paper Mills Ltd. [1998 (97) ELT 3 (S.C.)] apex court held that “if a machine is embedded to the earth only to ensure wobble-free functioning, that would not be considered as immovable”. And we know everything which is not movable is immovable.”
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