LANDMARK - BIG NEWS for Jewellers - GST to be paid only on margin earned on resale of second-hand jewellery: AAR

Jewellers will have to pay GST only on the profit earned on resale of second-hand gold jewellery, Karnataka AAR has ruled. The application to the Authority for Advance Ruling (AAR) was filed by Bengaluru-based Aadhya Gold Private Ltd seeking clarity on whether GST is to be paid only on the difference between the selling and purchase price if it purchases used/second- hand gold jewellery from individuals and there is no change in the form/nature of goods at the time of sale.

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The Karnataka bench of the AAR observed that GST is payable only on the margin between the sale price and the purchase price, since the applicant was not melting the jewellery to transform it to bullion and then recreating it into new jewellery, but rather cleaning and polishing the old jewellery without changing the form of the jewellery purchased.

Experts said this ruling will reduce the GST payable on resale of second-hand jewellery. Currently, the industry usually charges GST at three per cent rate on the gross sale value received from the purchaser.

AMRG & Associates Senior Partner Rajat Mohan said most jewellers procure old jewellery from common man/unregistered dealers, obliviating the need for credit of taxes in the hands of jewellers.

"The Karnataka AAR's decision to charge GST only on the difference between the purchase price and the selling price will have a significant impact on the industry to lower the tax cost to the final consumer," Mohan added.