Margin-based valuation unavailable where melting gold jewellery changes the nature of goods and shifts tariff classification.

Melting second-hand gold jewellery into lumps or irregular shapes changes the nature of the goods, so Rule 32(5) of the CGST Rules does not permit margin-based valuation for that supply. The ruling states that the second-hand goods concession applies only where the supplier deals in buying and selling such goods and the processing is merely minor, without altering their character. It also clarifies classification: old gold jewellery remains jewellery under HSN 7113, while gold after melting into lumps or irregular shapes falls under HSN 7108. The applicable tariff heading therefore depends on the form of the goods at the time of supply.

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Issues: (i) Whether the applicant, after melting second-hand gold jewellery or parts of jewellery into lumps or irregular shapes, could apply Rule 32(5) of the Central Goods and Services Tax Rules, 2017 and pay tax only on the margin difference. (ii) Whether old gold jewellery is classifiable under HSN 7113 and whether the melted gold lumps or irregular shapes fall under HSN 7108.

Issue (i): Whether the applicant, after melting second-hand gold jewellery or parts of jewellery into lumps or irregular shapes, could apply Rule 32(5) of the Central Goods and Services Tax Rules, 2017 and pay tax only on the margin difference.

Analysis: Rule 32(5) applies only where a taxable supply is made by a person dealing in buying and selling second-hand goods, the goods undergo only minor processing that does not change their nature, and no input tax credit has been taken on the purchase. Gold jewellery and gold lumps were treated as distinct goods with different characteristics and classifications. Melting jewellery into lumps changes the nature of the goods, so the processing is not merely minor processing within the rule.

Conclusion: The applicant cannot apply Rule 32(5) to the melted gold lumps or irregular shapes and cannot claim margin-based valuation for that supply.

Issue (ii): Whether old gold jewellery is classifiable under HSN 7113 and whether the melted gold lumps or irregular shapes fall under HSN 7108.

Analysis: Gold jewellery and parts thereof were treated as articles of jewellery of precious metal under HSN 7113. After melting, the goods became gold in unwrought or semi-manufactured form, which falls under HSN 7108. The classification therefore depends on the form of the goods at the relevant stage of supply.

Conclusion: Old gold jewellery falls under HSN 7113, while gold after melting into lumps or irregular shapes falls under HSN 7108.

Final Conclusion: The ruling denies margin-scheme valuation for the melted goods and clarifies the correct tariff classification for both the jewellery stage and the post-melting stage.

Ratio Decidendi: Rule 32(5) applies only when minor processing does not alter the nature of second-hand goods; once processing changes the nature and classification of the goods, the margin scheme is unavailable.

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