The West Bengal Authority for Advance Ruling (AAR) recently ruled that old/ second hand gold or diamond jewellery procured from individuals and later supplied back to the same person after alterations would attract a Goods and Services Tax at the rate of 5%.
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 is involved in the purchase of old/ second hand gold or diamond jewellery from unregistered dealers without GST and further reshapes them or entirely remodels them to produce new products which are then supplied back to the provider or to a person different from whom the precious materials had been acquired initially.
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The Applicant raised the question whether the activity undertaken by them would be classified as a Supply of Goods under HSN: 7108/7113 and chargeable to a tax of 3% or whether the same is deemed to be a Supply of Service with a levy of 5% GST under SAC: 9988.
The two-member Bench of AAR comprising Dr. Tanisha Dutta, Joint Commissioner, CGST & CX and Joyjit Banik, Additional Commissioner, SGST after considering the submissions made by the Applicant 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.
The AAR Bench provided clarification in light of the provisions that, in the event the Applicant procures pre-owned gold or diamond jewellery from unregistered dealers, conducts minor processing and supplies the jewellery back to the original owner, such activity shall be deemed to be a ‘Supply of Services’ and not Supply of Goods.
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In light of the ruling, AAR proceeded to provide clarity towards the Applicant’s question by ruling that a ‘Supply of Service’ rendered by the Applicant would be subject to tax at 5% with classification as per SAC 9988.
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