The Rajasthan Appellate Authority for Advance Ruling ( AAAR ) has clarified that the Margin Scheme as envisioned under Rule 35(5) of the Central Goods and Services Tax ( CGST ) Rules, 2017 shall be applicable on the sale of used lead acid batteries, plastic waste and scrap from aluminium, steel, copper and brass utensils.
The ruling was given by the Appellate Authority while entertaining an Application filed by Hitesh Gwalani, a supplier of waste papers who eyed the business of buying and selling of various goods such as old and used iron scrap, used lead acid batteries, used aluminum utensils and goods, old brass and steel utensils, scrap copper, plastic bags and PET bottles and worn out tyre tubes.
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The Appellant queried whether the purchase of goods from unregistered suppliers and resale to various manufacturers while charging GST on the difference between the selling and purchase price of the old goods, would qualify under the Margin Scheme notified under Rule 32(5) of the CGST Rules.
Appellant was dejected by the preceding application before the Authority for Advance Ruling (AAR) who rejected the applicability of the Margin Scheme to the Applicant’s matter citing that the concerned goods cannot be deemed ‘second-hand goods’ since they are scrap meant to be consumed/melted for manufacture of new items, leading to a change in the nature of goods.
The two-member Bench of Mahendra Ranga, Member (Central Tax) and Ravi Kumar Surpur, Member (State Tax) observed that the Appellant’s claim of second-hand goods owing to purchase from unregistered suppliers and subsequent sale without any process is not tenable.
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Citing an example of a used car, the Bench held that ‘a second hand car shall be used in the same way as a new car. Thus mere change of ownership is not sufficient to term them as second hand goods under the purview of Rule 32(5) of the CGST Rules, 2017’.
Identifying that the concerned goods may not be repurposed in their original form, they do not conform to the test of ‘continuity of usage’ and fall within the realm of scrap and not second hand goods, the Bench rendered them ineligible to operate under the Margin Scheme under Rule 32(5) of CGST Rules, 2017 as long as the goods are deemed scrap.
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