2019 (3) TMI 841 - AAR - GST

Used lead acid batteries qualify as 'second hand goods' under CGST Rules, enabling Margin Scheme use for inter-state supplies.

The ruling determined that the used lead acid batteries qualify as 'second hand goods', allowing the applicant to operate under the Margin Scheme for ... Margin scheme valuation for second hand goods under Rule 32(5) of the CGST Rules - qualification of used goods as second hand goods - applicability of CGST valuation rule to inter state supplies / IGST via mutatis mutandis application - scope of advance ruling under Section 97(2) of the CGST/RGST ActQualification of used goods as second hand goods - margin scheme valuation for second hand goods under Rule 32(5) of the CGST Rules - Used lead acid batteries qualify as second hand goods and the applicant is entitled to apply the margin scheme under Rule 32(5) of the CGST Rules. - HELD THAT: - Rule 32(5) permits a registered person dealing in buying and selling of second hand goods (used goods as such or after minor processing not changing their nature) to value the taxable supply as the difference between selling price and purchase price, provided no input tax credit was availed on purchase. The Authority found that the applicant procures used lead acid batteries without carrying out processing that changes their nature, and does not claim input tax credit on such purchases. Applying the statutory test in Rule 32(5), the used lead acid batteries therefore fall within the definition of second hand goods and the applicant may determine taxable value on the margin basis prescribed by the rule.Used lead acid batteries qualify as second hand goods and the applicant may operate under the margin scheme in respect of them.Scope of advance ruling under Section 97(2) of the CGST/RGST Act - The applicant's query on the appropriate heading/qualification in GSTR 3B is not a matter on which an advance ruling can be given under Section 97(2). - HELD THAT: - Section 97(2) of the CGST/RGST Act enumerates the matters on which advance rulings may be pronounced (classification, applicability of notifications, time and value of supply, admissibility of input tax credit, liability to pay tax, registration, and whether particular activity amounts to supply). The Authority observed that the specific query regarding which heading in GSTR 3B should record tax under the margin scheme does not fall within the listed subjects. Consequently, the Authority declined to give an advance ruling on that aspect.No advance ruling is given on the GSTR 3B classification query because it is outside the scope of Section 97(2).Applicability of CGST valuation rule to inter state supplies / IGST via mutatis mutandis application - margin scheme valuation for second hand goods under Rule 32(5) of the CGST Rules - Rule 32(5) of the CGST Rules applies to inter state supplies by virtue of the mutatis mutandis application of CGST provisions to IGST under Section 20 of the IGST Act and corresponding rules. - HELD THAT: - Rule 2 of the IGST Rules and Section 20 of the IGST Act provide that specified provisions of the CGST Act and rules shall apply mutatis mutandis for integrated tax. The subject of time and value of supply is covered by Section 20, thereby bringing valuation rules under the CGST regime within the IGST framework. Applying this legal framework, the Authority held that the margin scheme valuation in Rule 32(5) is available for inter state supplies of second hand goods, enabling the applicant to make inter state supplies of used lead acid batteries while operating under the margin scheme.Rule 32(5) applies to inter state supplies; the applicant may make inter state supplies of used lead acid batteries under the margin scheme.Final Conclusion: The Authority ruled that (1) used lead acid batteries qualify as second hand goods and the applicant may use the margin scheme under Rule 32(5); (2) no advance ruling is given on the GSTR 3B classification query as it falls outside Section 97(2); and (3) Rule 32(5) applies to inter state supplies, permitting the applicant to make inter state supplies under the margin scheme. Issues Involved:1. Qualification of used lead acid batteries as 'second hand goods' under the Margin Scheme.2. Classification of tax on outward supply under the Margin Scheme in GSTR-3B.3. Applicability of Margin Scheme for inter-state supplies of used lead acid batteries.Issue-wise Detailed Analysis:I. Qualification of Used Lead Acid Batteries as 'Second Hand Goods':The applicant, engaged in selling used lead acid batteries, sought determination on whether these batteries qualify as 'second hand goods' under Rule 32(5) of the CGST Rules, 2017. The Margin Scheme allows tax on the margin between the selling and purchase price of second hand goods, avoiding double taxation. Rule 32(5) specifies that this applies to used goods which undergo minor processing not altering their nature, and on which no Input Tax Credit is availed. The applicant purchases used lead acid batteries from unregistered suppliers and sells them without processing, qualifying them as 'second hand goods' under Rule 32(5). Thus, the applicant is entitled to operate under the Margin Scheme for these batteries.II. Classification of Tax on Outward Supply in GSTR-3B:The applicant queried the classification of tax on outward supply under the Margin Scheme in GSTR-3B. However, the Advance Ruling Authority noted that the query does not fall under the subjects specified in Section 97(2) of the CGST/RGST Act, 2017, which includes classification of goods/services, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, determination of tax liability, registration requirement, and whether an activity constitutes a supply. Consequently, no advance ruling was provided on this aspect.III. Applicability of Margin Scheme for Inter-State Supplies:The applicant also sought to determine if the Margin Scheme under Rule 32(5) of the CGST Rules, 2017 applies to inter-state supplies of used lead acid batteries. Section 20 of the IGST Act states that provisions of the CGST Act apply mutatis mutandis to the IGST Act, including those related to the time and value of supply. Therefore, Rule 32(5) of the CGST Rules, which provides for the Margin Scheme in intra-state supplies, is also applicable to inter-state supplies. The applicant is thus entitled to make inter-state supplies of used lead acid batteries under the Margin Scheme.Ruling:1. The used lead acid batteries qualify as 'second hand goods'. The applicant can operate under the Margin Scheme for these batteries.2. No advance ruling is given on the classification of tax on outward supply in GSTR-3B as the query is not specified in Section 97(2) of the CGST/RGST Act, 2017.3. The Margin Scheme under Rule 32(5) of the CGST Rules, 2017 applies to both intra-state and inter-state supplies. The applicant is entitled to make inter-state supplies of used lead acid batteries under the Margin Scheme.