2024 (6) TMI 166 - AAR - GST

Used iron scrap, batteries, aluminum utensils don't qualify as second hand goods under Rule 32(5) CGST Rules 2017

AAR Rajasthan held that used iron scrap, lead acid batteries, aluminum utensils, brass utensils, steel utensils, copper scrap, waste plastic bags, and PET ... Margin Scheme notified under Rule 32 (5) of the CGST Rules, 2017 - used Iron Scrap, used Lead Acid Batteries old used Aluminium utensils & other Aluminium Scrap, old used brass utensils and other scrap, used old steel utensils scrap, old used scrap of copper, used waste plastic bags & used plastic PET bottles etc. - second hand goods or not - whether the goods when sold outside the state or when sold within the state of Rajasthan qualifies under the Margin Scheme? Applicability of Margin Scheme u/r 32 (5) of the CGST Rules, 2017 - HELD THAT:- The applicant is dealing with used Iron Scrap, used Lead Acid Batteries old used Aluminium utensils & other Aluminium Scrap, used old Steel utensils scrap & old used scrap of copper, old used Brass utensils and other scrap, used waste plastic bags& used plastic PET bottles, therefore it cannot be covered under the definition of Second Hand Goods as basically these items can be termed as scrap which are to be consumed/melted for manufacture of new item and thus the nature of goods is changed - the items to be dealt with by the applicant do not qualify to be Second Hand Goods and therefore the applicant is not eligible to operate under the Margin Scheme in term of Rule 32 (5) of Central Goods and Service Tax Rules, 2017. Since the items to be dealt with by the applicant do not qualify to be Second Hand Goods, the applicant is not eligible to operate under Margin Scheme in term of Rule 32 (5) of Central Goods and Service Tax Rules, 2017 read with corresponding provisions of SGST Rules, 2017. Whether the benefit of the Margin Scheme is available for intra-state or inter-state supply of goods? - HELD THAT:- Since it is established that the applicant is not eligible to operate under Margin Scheme in term of Rule 32 (5) of Central Goods and Service Tax Rules, 2017 read with corresponding provisions of SGST Rules, 2017 as the items to be dealt with by them do not qualify to be Second Hand Goods, the benefit is neither available for intra state supply of goods nor inter-state supply of goods. Issues Involved1. Applicability of the Margin Scheme under Rule 32(5) of the CGST Rules, 2017 to the sale of various types of scrap.2. Applicability of the Margin Scheme for both intra-state and inter-state supplies.Detailed AnalysisIssue 1: Applicability of the Margin Scheme under Rule 32(5) of the CGST Rules, 2017Applicant's Submission:- The applicant, registered under GST, intends to start a business selling various types of scrap, including used iron scrap, lead acid batteries, aluminum utensils, brass utensils, steel utensils, copper scrap, waste plastic bags, and PET bottles.- The applicant plans to purchase these items from unregistered suppliers and sell them to manufacturers, charging GST on the margin between the selling price and the purchase price, as per Rule 32(5) of the CGST Rules, 2017.- The applicant argues that these items qualify as second-hand goods and thus fall under the Margin Scheme to avoid double taxation.Jurisdictional Officer's Comments:- The officer contends that the items in question are not second-hand goods but scrap, which are used as raw materials in manufacturing new items, thereby changing their nature.- The officer refers to Notification No. 8/2018-Central Tax (Rate), which clarifies that the Margin Scheme is applicable only to old and used motor vehicles, not to the types of scrap mentioned by the applicant.Findings and Conclusion:- The Authority examined the facts, supporting documents, and submissions made by both the applicant and the jurisdictional officer.- Rule 32(5) of the CGST Rules, 2017, specifies that the Margin Scheme applies to second-hand goods, defined in common trade parlance as any new or used property disposed of by its original owner.- The items dealt with by the applicant, such as used iron scrap, lead acid batteries, aluminum utensils, etc., are considered scrap rather than second-hand goods because they are to be consumed or melted to manufacture new items, thus changing their nature.- Therefore, these items do not qualify as second-hand goods, and the applicant is not eligible to operate under the Margin Scheme.Ruling:- The applicant is not covered under the Margin Scheme notified under Rule 32(5) of the CGST Rules, 2017.Issue 2: Applicability of the Margin Scheme for Intra-State and Inter-State SuppliesApplicant's Interpretation:- The applicant argues that Rule 32(5) of the CGST Rules, 2017, should apply to both intra-state and inter-state supplies, as per Section 20 of the IGST Act, 2017, which states that the provisions of the CGST Act shall apply mutatis mutandis to the IGST Act.Findings and Conclusion:- Since the items dealt with by the applicant do not qualify as second-hand goods, the Margin Scheme is not applicable.- Consequently, the benefit of the Margin Scheme is not available for either intra-state or inter-state supplies of the goods mentioned.Ruling:- The benefit of the Margin Scheme notified under Rule 32(5) of the CGST Rules, 2017, is not available to the applicant for either intra-state or inter-state supply of goods.Final Ruling1. The applicant is not covered under the Margin Scheme notified under Rule 32(5) of the CGST Rules, 2017.2. The benefit of the Margin Scheme is not available for the intra-state or inter-state supply of the goods mentioned by the applicant.