If one decides to buy second-hand jewellery as such i.e. without further processing thereon then the same becomes subject to tax under GST at the value which is equal to the difference between the selling price and purchase price in the hands of the dealer.
The above value is determined in accordance with Rule 32(5) of the CGST Rules, 2017 which reads as follows:
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 purchase price and where the value of such supply is negative, it shall be ignored.
Say, a dealer of jewellery purchased second-hand jewellery from a common man. Since the purchase is made from a common man of jewellery which was used by the latter for personal purposes, the same cannot be subject to GST liability. Hence, no GST is paid on such purchase as a result of which question of availing any input tax credit is out of the picture.
When the aforementioned jewellery is further sold by the dealer as such, without any processing but only polishing and cleaning of the same such that the characters of it do not change, then GST will be charged only on the profit i.e. Difference between the sale price and purchase price in dealer’s hands.
The above treatment is backed by Advance Ruling in the case of M/s Aadhya Gold Pvt Ltd dated 9.7.2021.
Thus, purchase of second hand jewellery is rewarding in so far as the dealer doesn’t charge GST on the entire sale consideration but only on the profit margin earned by him.
