No GST on sale of old jewellery, vehicles by individuals

The revenue department on Thursday clarified that the sale of old jewellery as well as old vehicles by individuals will not attract any goods and services tax (GST) as the sale is not for furthering any business.

Clarifying on Revenue Secretary Hasmukh Adhia’s comments, the department issued a press statement saying it was informed at GST Master Class on Wednesday that “purchase of old gold jewellery by a jeweller from a consumer will be subject to GST at the rate of 3 per cent under reverse charge mechanism in terms of the provisions contained in Section 9(4) of the Central GST Act, 2017”.

It then went on to state that the said section has to be read in conjunction with another section and “even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course or furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se.”

“Accordingly, the sale of old jewellery by an individual to a jeweller will not attract the provisions of Section 9(4) and jeweller will not be liable to pay tax under reverse charge mechanism (RCM) on such purchases,” it said.

Revenue department officials said the same principal would apply on the sale of old cars or two-wheelers and no GST would be payable even though the supply would be for a consideration.

The statement said Section 9(4) of the said Act mandates that tax on supply of taxable goods (gold in this case) by an unregistered supplier (an individual in this case) to a registered person (the jeweller in this case) will be paid by the registered person (the jeweller in this case) under reverse charge mechanism.

But since the sale is not in consideration for the furtherance of business no tax will apply. It, however, said the tax would apply if an unregistered business sells gold ornaments to registered supplier. “However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax under RCM will apply,” it added. A supplier is defined as the one who buys or sells in furtherance of his business.