The Karnataka Authority for Advance Ruling (AAR), ruled that claim of Input Tax Credit can be made under the Marginal Scheme for expenses like Rent, Advertisement, etc.
The applicant, M/s Attica Gold Private Ltd stated that they are into the sale of second-hand goods i.e used gold jewelry which they are buying from individuals who fall under the category of unregistered dealers. Hence, they follow the “Marginal Scheme” for discharging the GST liability under Rule 32(5) of the CGST Rules 2017 which provides that, 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 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 the purchase price and where the value of such supply is negative, it shall be ignored.
The applicant submitted that a person dealing with second-hand goods is allowed to pay the tax on margin i.e., the difference between the value at which the goods are supplied and the price at which the goods are purchased. If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation as the goods, having once borne the incidence of tax, re-enter the economic supply chain.
The applicant has sought the advance ruling in respect of the following question as to whether an applicant who is under the Marginal Scheme can claim an Input Tax Credit on the expenses like Rent, Advertisement expenses, commission, Professional expenses, and other expenses.
A Division Bench consisting of Dr. M.P. Ravi Prasad Additional Commissioner of Commercial Taxes Member (State) and Kiran Reddy T Additional Commissioner of Customs and Indirect Taxes Member (Central) held that “Applicant who is under Marginal Scheme can claim Input Tax Credit on the expenses like Rent, Advertisement expenses, commission, Professional expenses and other like expenses subject to section 16 to 21 and rules 36¬45 of CGST Act and Rules 2017.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
