Order Date – 15 May 2023                                                                                                                 

Facts –

• The Applicant, M/s. White Gold Bullion Private Limited, is engaged in the business of purchase and sale of used gold (Second hand goods). They purchase the used old gold jewellery from the unregistered persons and sells the same to others after cleaning and polishing it. They also melt the unsold Old used Jewellery / parts which remain unsold.
• They do not charge GST on the purchase of these old Jewelleries / parts as per Notification No. 10/2017- Central Tax (Rate) dated 28-06-2017 and pays the GST on outward supplies as per Rule 32(5) as stipulated in this Notification. The applicant does not take any input on these purchases.

Issue –

• Whether the applicant has to pay GST on second hand gold?

Order –

• The AAR observed that in the instant case, the applicant is purchasing second hand gold in the form of jewellery from unregistered individuals and supplies to registered / unregistered persons in the form of lumps after melting the same. One of the conditions to apply rule 32(5) for their outward supplies is that supply made by the supplier must be a taxable supply. The applicant is into supply of gold, which is a taxable supply and hence the first condition is satisfied.
• It is clear that tariff heading 7113 pertains to jewellery and parts thereof of precious metal which includes gold jewellery, and tariff heading 7108 pertains to gold in unwrought or semi-manufactured forms such as gold lumps or irregular shapes of gold.
• When the applicant melts the gold jewellery into gold lumps, the nature of goods changes in as much as the characteristics of the articles and the classification changes. Since the processing done by the applicant changes the nature of goods, they do not satisfy the second condition viz. used goods should not change its nature, and hence not eligible to avail the benefits of Rule 32(5) of CGST Rules, 2017.