Can Marginal Scheme Taxpayers Claim ITC of Input Services and Capital Goods ?—Vishambhar Dayal

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers GST--Input Tax Credit Can Marginal Scheme Taxpayers Claim ITC Can Marginal Scheme Taxpayers Claim ITC of Input Services and Capital Goods? Vishambhar Dayal The learned author seeks to make an analytical study of the issue as to whether marginal scheme taxpayers can claim ITC of input services and capital goods used for making supply of second hand goods. The discussion is based on the relevant statutory provisions and a recent advance ruling of the Karnataka Authority for Advance Ruling in the case of Attica Gold (P) Ltd., In re (AAR-Karn), decided on 27-10-2022. 1. Introduction Under the GST regime, a person dealing with the second-hand goods is allowed to pay the tax on margin i.e., the difference between the value at which the goods are supplied and the price at which the goods are purchased. If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation as the goods, having once borne the incidence of tax, re-enter the economic supply chain. The method of valuation is prescribed under sub-rule (5) of rule 32 of the CGST Rules, according to which 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 the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Input Tax Credit

Can Marginal Scheme Taxpayers Claim ITC

Can Marginal Scheme Taxpayers Claim ITC of Input Services and Capital Goods?

Vishambhar Dayal

The learned author seeks to make an analytical study of the issue as to whether marginal scheme taxpayers can claim ITC of input services and capital goods used for making supply of second hand goods. The discussion is based on the relevant statutory provisions and a recent advance ruling of the Karnataka Authority for Advance Ruling in the case of Attica Gold (P) Ltd., In re (AAR-Karn), decided on 27-10-2022.

1. Introduction

Under the GST regime, a person dealing with the second-hand goods is allowed to pay the tax on margin i.e., the difference between the value at which the goods are supplied and the price at which the goods are purchased. If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation as the goods, having once borne the incidence of tax, re-enter the economic supply chain.

The method of valuation is prescribed under sub-rule (5) of rule 32 of the CGST Rules, according to which 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 the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored.