On Sale Of Second Hand Jewellery, GST Applicable Only On Margin Earned

Karnataka Advance Ruling Authority has given a very important ruling regarding GST applicability on sale of second-hand jewellery by jewellers. When the used or second hand jewellery is sold in its original form, GST would be applicable not on the sale value but on the margin earned by the jeweller.

Karantaka AAR has said that GST is payable only on the difference between the sale price and purchase price.

The ruling came in regard to the application filed with the authority for Advance ruling by Bengaluru based Aadhya Gold Private Limited.

Due to reduced GST application the ruling would now lower the taxes on resale of second hand jewellery which in turn would make the product cheaper comparatively.

The applicant sought clarification that whether GST on sale of used / second hand jewellery purchased from individual would be charged on the difference between the sale price and purchase price or would it be charged at the total sale value of that second hand jewellery.

Let’s understand why this question arose. Generally, GST is charged on the consideration received against the sale. And even jewellers tend to levy GST at the rate of 3% on the total sale value charged whether it is for the second hand jewellery or the brand new ones.

But mostly these second-hand jewelleries are purchased from individuals who are unregistered. Therefore, there is no scope of input tax credit that can be availed on the purchased value as in case of new jewellery which are purchased from registered persons.  

Karnataka Advance Ruling Authority held that the second hand jewellery which is being sold as it is i.e. without melting into bullion or changing its form, but only after cleaning and polishing, then GST would be applicable only on the difference between the sale value and purchase value.