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.

In Re: M/s. Shambhu Traders Private Limited

The ruling determined that the used lead acid batteries qualify as 'second hand goods', allowing the applicant to operate under the Margin Scheme for ... Second hand goods - Applicability of Margin Scheme under Rule 32(5) of the Central Goods and Service Tax Rules, 2017 - selling the used lead acid batteries to other manufacturers whether such used lead acid batteries qualify as ‘second hand goods’ - Outward Supply under the Margin Scheme - GSTR-3B - Held that:- The used lead acid batteries qualify to be second hand goods. Accordingly, the Applicant dealer is entitled to operate under the Margin Scheme in respect of the used lead acid batteries. In terms of Rule 2 of the Integrated Goods and Service Tax Rules, 2017, the Central Goods and Service Tax Rules, 2017, for carrying out the provisions specified in Section 20 of the Integrated Goods and Service Tax Act, 2017 shall, so far as may be, apply in relation to integrated tax as they apply in case of central tax. Section 20 of the IGST Act prescribes that the provisions of the CGST Act shall mutatis mutandis apply to various subjects which have been provided under Section 20 - The subject pertaining to ‘time and value of supply’ is covered under Section 20, hence the rules made under CGST Act in relation to valuation of a supply is applicable to IGST Act as well. Rule 32(5) of the CGST Rules, 2017 which provides for Margin Scheme in case of intra-state supplies shall also be applicable in case of inter-state supplies and the applicant is entitled to make inter-state supplies of used lead acid batteries while operating 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.