Second Hand Goods Dealer and Composition Scheme in GST
The Analysis of the provisions of Second Hand Goods Dealer and Composition Scheme in GST.
Read out whether the Second Hand Goods Dealer opt For Composition Scheme?
Section-9 (Levy and collection):
As per Section 9(1) of the CGST Act, 2017, Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15.
Section -15 (Valuation under GST)
As Per Section 15(4) of the CGST Act, 2017, where the value of the supply of goods or services or both cannot be determined under Section 15(1), the same shall be determined in such manner as may be prescribed. Valuations rules are prescribed under Chapter IV of the CGST Rules, 2017 from Rule 27 to Rule 35.
Rule 32(5): Valuation of Second Hand Goods:
As per Rule 32(5) of the CGST Rules, 2017, 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.
Rule 32(5) flows from Section 15(4) which applies only to the cases covered by Section 9 of the CGST Act, 2017.
Section-10 (Composition Levy):
Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed one crore and fifty lakh, may opt to pay, [in lieu of the tax payable by him under sub-section (1) of section 9, an amount calculated at such rate] as may be prescribed, but not exceeding,––
(a) 1%. of the turnover in State or turnover in Union territory in case of a manufacturer,
(b) 2.5%. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and
(c) 0.5% of the turnover in State or turnover in Union territory in case of other suppliers, subject to such conditions and restrictions as may be prescribed.
Conclusion:
- Person dealing in Second-hand goods pay tax on the value prescribe under Rule 32(5). As Rule 32(5) flows from Section 15(4) which applies only to the cases covered by Section 9 of the CGST Act, 2017 not by Section 10. Therefore, dealers of Second-hand goods cannot opt for the composition scheme.
- Secondly, the similarity between the two provisions regarding Non availment of Input Tax Credit under Rule 32(5) & Section 10 doesn’t make Taxable Registered person dealing in second-hand goods liable to opt composition scheme.
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