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Hello friends, greetings for the day in the current article we will discuss about margin scheme also known to be as second hand goods scheme in which goods which are brought to the market and goods are sold as second hand item then procedure and provisions are given in GST laws we will discuss about in brief.


Normally GST is charged on the transaction value of the goods or services or both supplied by the supplier. However in respect of “Second hand goods” a person is dealing in such goods may be allowed to pay tax on the margin money or the differential amount. GST would be charged at the difference between the value at which goods are supplied  and the price at which the goods are purchased. If there is no margin then the there would not be any GST would be charged on such supply.

The purpose of such scheme is to avoid double taxation as the goods have already borne the incidence of tax by the end consumer and it is re-entering the market so if GST would be charged on whole amount there will be double taxation, so to mitigate this situation margin scheme was introduced in GST provisions to avoid double taxation and to charge GST only on the margin amount.


As per 32(5) of CGST Rules 2017, where a taxable 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.

Important points to be noted:-

  • Nature of goods– As per the CGST rules if selling of goods are done then in case of further processing of goods it must be minor processing which does not change the nature of goods intended to be supplied at the beginning .
  • Minor processing– Rule also stipulates what kind of processing can be done as per 32(5) there must be minor processing of the goods and it must not lead to change in nature of goods originally intended to be supplied.

Rule 32(5) further states that the proviso to the above rule states that in case of the purchase value of goods repossessed from an 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 the “repossession”.

Notification no 10/2017-Central tax(Rate) New Delhi, dated 28 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.

Illustration: For instance, a company say M/s First Source Ltd, which deals in buying and selling of second hand cars, purchases a second hand Maruti Celerio Car of March,

2014 make (Original price Rs. 5 lakh) for Rs. 3 lakhs from an unregistered person and sells the same after minor furbishing in July, 2017 for Rs. 3,50,000/-. The supply of the car to the company for Rs. 3 lakh shall be exempted and the supply of the same by the company to its customer for Rs. 3.5 lakh shall be taxed and GST shall be levied.The value for GST purpose shall be Rs. 50000/

In case of any doubts in the current topic or provisions of Indirect taxation (GST and CUSTOMS) then you may contact us at abhutpurv@gmail.com


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July 2024