Tuesday, October 4, 2022

Big relief on buying and selling second-hand gold jewelry, now GST will be applicable only on profits

Gold Jewelry Resale: A major decision of the Authority for Advance Ruling (AAR) has come regarding the GST levied on the purchase and sale of gold jewelry. With this decision, the GST on the resale of second-hand jewelry will be significantly reduced. This will benefit those consumers who will buy second-hand jewelry. They have to pay less tax.

GST on selling second-hand gold jewelry

According to this decision of Karnataka AAR, only the profit earned by the jewelers on the resale of second-hand gold jewelry will attract GST. Aadhya Gold Private Ltd, a Bangalore-based company had given an application in AAR. In which clarification was sought on whether GST would be applicable only on the difference in prices between the purchase and sale of second-hand gold jewelry if its form or nature has not been changed while selling the jewelry. 

Here is the decision of AAR 

The Karnataka Bench of AAR says that since the jeweler is not melting the jewelry into bullion and then making new jewelry from it, but is cleaning and polishing it and selling it without changing its form, hence the purchase of jewelry and Whatever is the margin between sales, only that will attract GST. 

Read More: Ola Electric Scooter bookings have begun; they cost Rs 499 and have a range of 150 kilometers

What do experts say

Experts say that due to this decision, the GST on the resale of second-hand jewelry will be reduced significantly. At present, the industry charges 3% on the total value of gold ornaments from buyers. But this will not happen after this rule. GST will be applicable only on profit instead of the total cost. This means that suppose the value of any gold jewelry is Rs 1 lakh, then 3% GST on it is Rs 3000, now if the same is to be levied on the profit. Suppose this jewelry was bought for Rs 80 thousand and sold for Rs 1 lakh, then the profit came to Rs 20,000. So 3% GST on 20000 is Rs.600. 

Tax will be reduced on second-hand jewelry buyers 

Rajat Mohan, Senior Partner, AMRG & Associates says that most of the jewelers buy old jewelry from common man/unregistered dealers to avoid the need for a tax credit in the hands of jewelers. Mohan said Karnataka AAR’s decision to levy GST only on the difference between the purchase price and the selling price will reduce the tax burden for consumers, which will impact the industry. 

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