Second hand good purchased from ex employer (Bank)

[vivin vijay]

Dear expert, I am currently working in bank, wherein I have purchased furnitures under the furniture allowance of the bank, the purchsses were made in 2015 and 2016, wherein I had paid VAT, (GST was not implemented at that time), these furnitures were purchased in the name of bank, now since I am leaving the organization , I have to purchase it back from the bank at depreciated cost, my bank while has depreciated the value, but has charged me GST on the depreciated value , my question is is GST applicable? Does it not come under the section 32(5) , where in a second hand good will not come under GST as the selling price is Lower than purchase price ,and no input credit was obtained at the time of purchase ( please note the purchaser is a bank) , my last question if it's applicable , on what value is it applicable , on the difference between purchase and sale or the sale price ?

[Alkesh Jani]

Sir, my view is that Rule 32(5) of CGST, Rules, 2017, is not applicable in your case, as the Bank is not engaged in dealing i.e. sale and purchase of second hand goods. The Section 15(1) of the CGST, Act, 2017, is applicable in your case and Bank has rightly charged GST on the depreciated value. Our expert may correct me if mistaken.

[vivin vijay]

Dear expert, on what will you consider GST if applicable, on the depreciated value which includes VAT as well ? Currently, the value including GST , makes the price of the second hand good which was purchased two years become more expensive then it's purchase price , as the the GST ranges between as high as 28 percent on the LCD and 18 percent on the furniture. Also one more question since in this transaction the bank is a seller of furniture hence by the nature it becomes a dealer even though the principal activity is not to sell furniture.

[KASTURI SETHI]

Bank cannot be termed as a dealer by any stretch of imagination. By selling second hand goods Bank does not become a dealer at all.

[KASTURI SETHI]

Dear Querist,

Peruse replies of Sh.Sanjay Malhotra, C.S. in respect of Issue ID no.113103 dated 24.11.2017. All doubts will be cleared.

[Ganeshan Kalyani]

for car there is different tax rate based on notifications released. however, on furniture i m doubtful that cbec has given any clarification on this

[Ganeshan Kalyani]

tax is payable on sale value @ 18%.

[KASTURI SETHI]

Dear Querist,

The following extract is relevant for you though it pertains to pre-GST era. It is an extract from the judgement:-

[5(A) (a) If the capital goods, on which Cenvat credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the Cenvat Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter or a year or part thereof from the date of taking the Cenvat Credit, namely.

(i) for computers and computer peripherals :

For each quarter in the first year @ 10%

For each quarter in the second year @ 8%

For each quarter in the third year @ 5%

For each quarter in the fourth and fifth year @ 1%

(ii) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter :

Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.

(b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.]

[(5B) If the value of any,

(i) input, or

(ii) capital goods before being put to use,

[on which Cenvat credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then] the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the Cenvat credit paid earlier subject to the other provisions of these rules.]

[MUKUND THAKKAR]

please refer your branch balance sheet if all said furniture covered under assets, Than GST is applicable.

AI Summary

GST on second hand goods: tax applies on the employer's sale and valuation follows GST transaction value rules. GST applies to the employer's sale of used assets when the transfer is a taxable supply and the seller is disposing of capital assets rather than trading in second hand goods. Taxable value must be determined under GST valuation rules and generally supports charging tax on the transaction value of the disposed asset; second hand concessions aimed at dealers do not automatically apply. Parties must also consider asset classification, reversal or adjustment of prior indirect tax credits, and the applicable tax rate for the class of goods.