The West Bengal Authority for Advance Ruling (AAR) recently ruled that the supply of old/ second hand gold or diamond jewellery initially purchased by the Applicant, and further subjected to minor processing are liable to Goods and Services Tax (GST) of 3%.
The Application for advance ruling was filed by Kundan Kumar Prasad, a general order supplier of gold and diamonds who intends to be a manufacturer providing order-based services to its customers.
Applicant purchases old/ second hand gold or diamond jewellery from unregistered dealers without GST and further reshapes them or entirely remodels them to produce new products that are then sold to a third person, different from the person from whom the precious materials had been acquired.
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One of the key questions raised was whether the activity undertaken by the Applicant would be categorized as a ‘supply of goods’ and chargeable to 3% GST as per HSN Code 7108 & 7113.
The two-member Bench of AAR comprising Dr. Tanisha Dutta, Joint Commissioner, CGST & CX and Joyjit Banik, Additional Commissioner, SGST ruled that the Applicant is permitted to avail the valuation method as per Rule 32(5) of the Central Goods and Service Tax Rules, 2017 in cases where the pre-owned gold/diamond jewellery procured by the Applicant does not change the base nature of the ornament after minor processing.
Further, the West Bengal Authority for Advance Ruling provided clarification that when the Applicant conducts minor processing on old/second hand gold or diamond jewellery and subsequently sells the same to a third person, such activity shall be deemed to be a “Supply of Goods”.
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In light of the classification of the Applicant’s activity as a Supply of Goods, the AAR ruled the applicability of 3% GST as per the Description of Goods provided in HSN Code 71008 and 7113.
Additionally, the Bench held that the Applicant would not be liable to pay tax under reverse charge mechanism on the purchase of old/ second hand gold or diamond jewellery from individuals who are not dealers and neither registered under the GST regime.
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