Turnover and Value of Supply

[Guest]

Sir, I understand that the threshold limit for compulsorily registering under GST is aggregate turnover of 20 lakhs. How is this turnover determined in case of a secondhand goods dealer,? Just to give an example Assuming I have purchased all secondhand goods from gst registered dealers during the year for a total of 18 lakhs and have sold the same for 21 lakhs. What will be my aggregate turnover?... Is it 21 lakhs or is it 3 lakhs? In this case will I have to register compulsarily for GST? Warm regards.

[KASTURI SETHI]

Your turnover is 21 lakhs.

[Guest]

Sir,
I am confused because going by the definitions given below it leads to understanding that

Aggregate Turnover is value of all supplies whereas the value of supply under Rule 6(5) is determined as difference between the selling price and purchase price in case of dealers in secondhand goods.

Aggregate turnover' is defined in section 2(6) of the Model GST Law as follows –

"Aggregate turnover means the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be."

Rule 6(5) of "Determination of Value of Supply" rules state as below: "Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on purchase of such goods the value of supply shall be the difference between the selling price and purchase price and where the value of such supply is negative it shall be ignored."

[KASTURI SETHI]

You are to compute aggregate value for the purpose of threshold exemption as per Section 2(6) of CGST.

You are referring to "determination of value of supply"as per Model GST Act. It is for different purpose. Now study CGST/SGST/IGST and not Model GST Act. Model GST was at draft level prior to enactment.

[Preeti Sharma]

Hello Mr. Kasturi Sethi,

I am also confused in case of second hand goods. Nothing is clear about it. Pls ellaborate in detail.

[KASTURI SETHI]

Rule 6(5) of "Determination of Value of Supply" is meant for determination of valuation for the purpose of payment of GST and definition of 'Aggregate turnover' under CGST is meant for arriving at ceiling limit of threshold exemption of ₹ 20 lakhs. Both have been framed with different purposes and we are not to intermingle them.They have to be read in isolation and not in conjunction.

In the example cited by the querist, value addition is ₹ 3 lakhs and after availing threshold exemption, GST has to be paid on Rs. one lakh (Rs.21-20).

Model GST Act is not to be referred only various GST Acts are to referred.

[Guest]

Sir, just to make things more clear for me , in the above example of 18 lakhs purchase and 21 lakhs sale, if the dealer opts for registering under composite scheme will he be paying tax on 21 lakhs being the sale value as done generally in a composition scheme or he will have to pay tax on 3 lakhs that being the difference of purchase and sale prices as per rules for valuation of supply for secondhand goods traders. I am asking this because I want to know if the valuation rule for seconhand goods applies for both schemes , regular gst and also under composition gst or this valuation rule applies only for the normal GST scheme.

[KASTURI SETHI]

If you opt for composition scheme, you are not eligible for threshold exemption. You will have to pay GST on transaction value of ₹ 21 lakhs. Transaction Value mean whatever amount you get from your buyer. Pl. Note the word, 'Whatevet' from the buyer as sale proceeds in any form. We are to go by the word, 'transaction' and not second hand or anew car.

[Ramesh Kothari]

It's 21lakh

ever turnover calculated on sales value not purcased value

 

[KASTURI SETHI]

Board has issued clarification today. No GST on used items if sold at price less than purchase price. Section 32 (5) of CGST Act has to be followed.

AI Summary

GST Turnover for Secondhand Goods Dealers Based on Total Sales, Not Profit Margin; Clarified Under Section 32(5) CGST Act. A discussion on the Goods and Services Tax (GST) threshold for secondhand goods dealers centers around whether the aggregate turnover is based on total sales or the profit margin. A participant queries if a dealer purchasing goods for 18 lakhs and selling for 21 lakhs should consider the turnover as 21 lakhs or 3 lakhs. Responses clarify that the aggregate turnover for GST registration is the total sales value, 21 lakhs, not the profit margin. Different rules apply for valuation under GST and composition schemes. Clarifications indicate no GST on used items sold below purchase price, as per Section 32(5) of the CGST Act.