GST – AAR Karnataka: Under marginal scheme, Rule 32(5) bars availment of ITC on purchase of second hand goods, there is no restriction on availment of ITC in respect of input services or capital good – Hence, credit can be claimed on expenses like rent, advertisement, commission, professional charges, and capital goods [Order attached]
Order date – 27 October 2022
- The Applicant, M/s. Attica Gold Private Limited is engaged in the business of sale of used gold jewellery, which they are buying from individuals who falls under the category of unregistered dealers.
- Hence, they followed “marginal scheme” for discharging the GST liability under Rule 32(5) of the CGST Rules 2017 read with Notification No.10/2017-Cetrl Tax (Rate) dated 28th June 2017
- The applicant also state that input tax on various expenses like advertisement, rent, professional charges and other expenses are claimable as per Section 16 of the CGST Act, where all conditions are satisfied without which business cannot be run.
- Whether applicant who is under marginal scheme can claim input tax credit on the expenses like advertisement, rent, professional charges and other expense?
- Whether ITC can claim on capital goods?
- The AAR state that as per Rule 32(5) of the CGST Rules 2017 a taxable supply provided by a person dealing in buying and selling of second had goods i.e. used goods as 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 shall be the difference between selling price and purchase price. If the value of such supply is negative then it shall be ignored.
- It is apparent from the above that the Rule 32(5) clearly bars availment input tax credit on purchase of second hand goods which the applicant is supplying. However, there is no restriction on the availment of input tax credit in respect of input services or capital good.
- Hence, input tax credit is eligible on expenses like advertisement, rent, professional charges, commission, other like expenses and capital goods subject to Section 16 to 21 and rule 36 to 45 of the CGST Act and Rules 2017.