Whether used lead acid batteries qualify as second hand goods and covered under Margin Scheme?

PJ/Case Law/2018-2019/3526

Case: Ms. Shambhu Traders Pvt Ltd. (GST AAR Rajasthan)

Citation: Advance Ruling No. RAJ/AAR/2018-19/35 dated 15.02.2019

Issue: Whether used lead acid batteries qualify as second hand goods and covered under Margin Scheme?

Brief Facts: The Applicant is engaged in the business of selling used lead acid batteries to various manufacturers.On purchase of used lead acid batteries from unregistered suppliers, the Applicant subsequently sells them to various manufacturers and charges GST on the difference between the sale price and purchase price of lead acid batteries in accordance with Rule 32(5) of the CGST Rules.
It is in this aforesaid background, the Applicant seeks determination on the question as to whether the used lead acid batteries qualify as ‘second hand goods’ and thus covered under the Margin Scheme notified under Rule 32(5) of the CGST Rules, 2017.
If yes, then the Tax on Outward Supply under the Margin Scheme would be qualified under which heading in GSTR-3B.
When the Applicant is operating under the Margin Scheme notified under Moreover, Rule 32(5) of the Central Goods and Service Tax Rules, 2017 (“CGST Rules, 2017”) is applicable on both intra as well as interstate supplies.

Appellant’s Contention:For goods to qualify as second hand goods as per Rule 32(5) of the CGST Rules, 2017 such goods need be (1) used goods as such or goods after minor processing that does not change the nature of goods (2) goods on which no Input Tax Credit has been availed.
It is submitted that used lead acid batteries are used goods and no processing is done on such goods. Therefore, these used lead acid batteries qualify as second hand goods in as much as these goods are ‘used goods as such’. Further, the Applicant does not avail Input Tax Credit on such used lead acid batteries.
Reference may also be placed on the Press Release dated 15th July, 2017 of the GST Council wherein the clarification issued in respect of the used bottles shall squarely be applicable in respect of the used lead acid batteries as just like used bottles no processing is done on the used lead acid batteries. Therefore, in the Applicant’s view, these used lead acid batteries qualify to be second hand goods. Accordingly, the Applicant dealer is entitled to operate under the Margin Scheme in respect of the used lead acid batteries.
Applicant interpreted in respect of second question that the person working under the Margin Scheme whether selling goods within the state or outside the state will classify the Taxable Supply under Point 3.1(a) while filing the Return GSTR 3B i.e. outward taxable Supplies
Therefore, the Applicant is of the view that it is entitled to make inter-state supplies of used lead acid batteries while operating under the Margin Scheme.
Respondent’s Contention and Reasoning of Judgment: The respondent agreed that the lead acid batteries qualify for second hand goods and therefore, margin scheme is applicable on the same keeping in view the contentions of the applicant.
The authority clarified that as the query raised by the applicant regarding qualification of tax on such outward supply in GSTR 3B is not specified in Section 97(2) of CGST Act/RGST Act, 2017, therefore, no advance ruling can be given on this aspect.
Section 20 of the IGST Act prescribes that the provisions of the CGST Act shall mutatis mutandis apply to various subjects which have been provided under Section 20. The subject pertaining to time and value of supply ‘ is also covered under Section 20, hence the rules made under CGST Act in relation to valuation of a supply is applicable to IGST Act as well.
Therefore, Rule 32(5) of the CGST Rules, 2017 which provides for Margin Scheme in case of intra-state supplies shall also be applicable in case of inter-state supplies.

Comment: Margin scheme has lowered the burden of taxes on second hand goods dealers. AAR has also taken a lenient approach while pronouncing ruling and clarified that if two conditions are satisfied to qualify as second hand goods, then margin scheme would be applicable in that case. GST has made ways simpler for the dealers dealing in such goods.

Prepared by: Adit Gupta

Comments

PJ/Case Law/2018-2019/3526

Post a Comment

Query