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Settlement of advance by customer

Tax queries 468 views 1 replies

We have a jewellery business. We are accepting advances by old gold and cash. 

Kindly advise on the scenarios:

Old gold purchased  last year, outstanding in the customer account as payable as on date Rs. 3,97,799 

Now the customer wants to buy gold worth Rs. 9,00,000, including GST, for the marriage of their daughter.

Rs. 5,02,201(invoice value minus outstanding advance) to be settled as follows:

  1. Old gold to exchange  against new ornaments invoiced above Rs., 3,07,201
  2. Balance of Rs., 1,95,000 by cash.

Is it legally valid / or violating any income tax rules 269ST/SS, etc.. Cash not exceeding the limit of Rs. 2 lakhs per event / single person.

Will Old Gold exchange against New ornaments attract Capital Gain Provisions to the customer ?

Replies (1)
Issue Position Comment
Cash ₹1.95 lakh ✅ Allowed Below Sec 269ST limit
Old gold advance ✅ Allowed Commercial advance, not loan
Section 269SS ❌ Not applicable Advance against sale
GST ✅ Charge GST on full ₹9 lakh Old gold part of consideration
Capital gains for customer ⚠️ Technically yes Jewellery = capital asset
Documentation Required Invoice + valuation report + PAN if >₹2 lakh


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