In Advance Ruling No. KAR ADRG 20/2023 – AAR - No GST on margin difference between the sale price and purchase price in second-hand gold jewellery transactions: AAR (Karnataka)
Members Dr. M.P. Ravi Prasad (State) & Kiran Reddy T (Central) [15-05-2023]

Read Order: In re: M/s. White Gold Bullion Private Limited

LE Correspondent

Bangalore, May 19, 2023: In a ruling by the Karnataka bench of the Authority for Advance Rulings, it has been held that M/s. White Gold Bullion Private Limited, engaged in the purchase of second-hand gold jewellery from unregistered individuals and selling it as melted gold lumps or irregular shapes to registered or unregistered dealers, cannot pay GST on the margin difference between the sale price and purchase price, as stipulated in Rule 32(5) of Central Goods and Services Tax Rules, 2017 (CGST Rules).

The applicant in this case had sought an advance ruling regarding whether they are required to pay GST on the margin difference between the sale price and purchase price when purchasing second-hand gold jewellery from unregistered individuals and selling it as melted gold lumps to registered or unregistered dealers.

The bench of Dr. M.P. Ravi Prasad (State) and Kiran Reddy T (Central) observed that one of the conditions to apply Rule 32(5) for their outward supplies was that supply made by the supplier must be a taxable supply.  Since, the applicant was into supply of gold, which was a taxable supply, the first condition stood satisfied.

The Authority noted that when the applicant melts gold jewellery into gold lumps, there is a change in the nature of the goods, including their characteristics and classification. Due to this change, the second condition necessary for the application of Rule 32(5) of the CGST Rules, 2017 was not fulfilled.

It was ruled that HSN Code for Old Gold Jewellery was 7113 and after melting into gold lumps or irregular shapes of gold the HSN Code was 7108.