Position regarding applicability of the Margin Scheme under GST for dealers in second hand goods in general and for dealers in old and used empty bottles in particular.

Doubts have been raised regarding the applicability of the Margin Scheme under GST for dealers in second hand goods in general and for dealers in old and used empty bottles in particular.

Rule 32(5) of the Central Goods and Services Tax (CGST) Rules, 2017 provides that 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. This is known as the margin scheme.

Further, notification No.10/2017-Central Tax (Rate), dated 28.06.2017 exempts Central Tax leviable on intra-State supplies of second hand goods received by a registered person, dealing in buying and selling of second hand goods [who pays the central tax on the value of outward supply of such second hand goods as determined under sub-rule (5)] from any supplier, who is not registered. This has been done to avoid double taxation on the outward supplies made by such registered person, since such person operating under the Margin Scheme cannot avail input tax credit on the purchase of second hand goods.

Thus, Margin Scheme can be availed of by any registered person dealing in buying and selling of second hand goods [including old and used empty bottles] and who satisfies the conditions as laid down in Rule 32(5) of the Central Goods and Services Tax Rules, 2017. (PIB)

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Category : Goods and Services Tax (4542)
Type : News (12540)
Tags : goods and services tax (3104) GST (2691)

One response to “Margin scheme under GST on old & used bottles”

  1. Aakash Aswani says:

    Sir,
    I have a query regarding the CBEC’s press release dated 15th July, 2017 in respect of margin scheme under GST for second hand goods (old used glass bottles). The notification suggests that the margin scheme is applicable to the registered buyer purchasing old used bottles from an unregistered seller. The queries are as follows: –
    i. Does the margin scheme have to be followed if the same registered buyer further sells the old bottles to someone (registered dealer) and further on?

    ii. If yes, then whether input credit can be availed from the second transaction onwards?

    iii. If such input credit cannot be availed, then the tax burden for every purchase has to be borne by the buyer. The basic concept of an indirect tax is that tax burden is shifted from seller to buyer. But in this case the buyer cannot avail input tax credit and has to bear the tax burden on the purchase. This would make the GST under margin scheme a direct tax.

    I would be thankful to you for any clarity on the issue as a lot of confusion still prevails in this matter

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