GST On Used Goods - Margin Scheme

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As Per The GST Council, GST Shall Apply To Used Goods Or Used Goods As Tax Applies On The Transaction Value. However, If The Concerned Person Registered With The Margin Scheme Under GST, Then The Person Shall Pay Taxes Only On The Margin Accumulated From The Sales. Thus The Registered Person Can File The Tax On The Margin Of Profit And Not On The Whole Transaction. This Avoids Double Taxation And Therefore The Person Can Be Exempt From Filing GST If The Loss Occurred During The Transaction. Somebody Registered With GST Can Avail Of This Scheme. During This Article, We Glance At The GST Margin Scheme And Sale Of Used Goods Under GST Thoroughly

Conditions For Availing Margin Scheme

The GST Council implemented the Margin Scheme under GST and released it through Notification No. 10/2017 on 28th June 2017. It applies to registered members managing to buy and sell second user goods excluding inward supply of used goods received by the person. To avail of this benefit, the registered person should fit two conditions as proposed by the GST Council. the 2 conditions are:

As per rule 32 (5) of CGST rules 2017, the registered person shall pay GST on the outward supply of such second user goods. The concerned individual shall determine the GST for the second user goods through the above-mentioned rule

The registered person must have obtained goods from an unregistered person.

Claiming Depreciation on second user Vehicles

Persons registered with GST can claim depreciation on used vehicles. Notification No. 8/2018 released by the GST Council on 25th January 2018, states that the person selling a used vehicle can claim depreciation as per Section 32 of the tax act 1961. the worth of the provision shall be calculated as (Value of the products while selling – Depreciation Value of the asset).


Taxable Value of Used Goods

A taxable supply is provided by someone attached to buying and selling of used goods. just in case of used goods sale, that no input reduction has been availed on the acquisition, the worth of supply is the difference between the asking price and therefore the damage, i.e. the margin. just in case the worth of such a supply is negative, it’d be ignored and the value of the supply would be assumed as zero. (Rule 32(5) of the CGST Rules, 2017).

In the case of the purchase of used goods that have been recovered from an unregistered defaulting borrower, the number of loans would be deemed to be the acquisition price of the products reduced by 5 percentage points for each quarter, between the date of purchase the and date of disposal by the person making such repossession.

Parameters for Availing the Scheme

To avail of the scheme the registered person under GST must satisfy all the 6 parameters within the transaction made between the client and therefore the seller:

Applies only to the provision of products and services and anything aside from goods and services shall exempt from the benefit

The individual should produce Review or Analysis document for the purchased goods or services from the unregistered person

The individual should are available in terms with the supplier of availing goods or services within the future

It applies only to persons registered with GST

The supply made the unregistered person should apply as a taxable supply

The supply obtained by the individual should have occurred within the boundaries of the taxable territory


Let’s take an example of an organization coping with selling and buying of second-hand bikes. the corporate purchases a second-hand bike from an unregistered person for Rs.1 lakh. the identical bike is successively sold by the corporate for Rs.1.5 lakh after minor refurbishing. In such a case, the taxable value of supply would be Rs.50,000 and GST would be levied thereon amount.

In case, the other value is added in terms of repair, refurbishment, reconditioning, then that quantity would be added to the worth of products and become part of the margin. If margin scheme has opted for a transaction of used goods, the persons selling the merchandise to the corporate won’t issue any tax invoice. the corporate purchasing the merchandise mustn’t claim any input decrease.