Second Hand Goods: GST Implication

Goods and Services Tax (GST) is a big game. We all are the players of this game. Every player, say he be manufacturer/ trader/ second hand dealer have an equal role to be played in this game.

In this article we will discuss about valuation of goods in case second hand goods are sold. The valuation here means value on which GST shall be charged. Valuation is done as per section 32 sub-section 5 of the Act.

There is an option given to the second hand dealers. We will minutely discuss both the options.

Option 1

If the second hand dealer opts for this they can claim the Input Tax Credit (ITC) on the purchases of the goods. The amount at which the GST would be levied on the sale transaction is the transaction value as per Section 15(1) of the Act.

This is nothing but the normal method of levying GST under this Act.

Option 2

This is an option which will not allow the second hand dealer to claim ITC on goods purchased.

In case of the outward supply the value at which GST will be charged is difference of Selling Price and the Purchase Price.

VALUE = SELLING PRICE – PURCHASE PRICE

On carefully analysing this one may infer that the Government is giving credit at the same rate at which output supply is being taxed.

In case of Hire purchase transaction, if the installment is not paid on time the lessor have the right to reposes the goods. How would GST be charged in case of this repossession?

The purchase value of goods repossessed from a defaulting borrower shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by 5% for every quarter or part thereof for the period between the date of purchase and the date of disposal by the person making such repossession.

Hope this article was helpful for understanding the concept of GST in case of Second hand goods.