Valuation and Margin Scheme

• Tax is levied on the margin (difference between selling and purchase price)
  
• If selling price is less than purchase price, no GST is applicable
  
• Applicable to dealers not availing input tax credit on purchases
  
• Ensures GST is only charged on value addition, not full price
  
• Rule 32(5) of CGST Rules governs this method
  

Applicable GST Rates

• Tax rate depends on nature of goods, e.g.,
  
  • Second-hand vehicles: 18% (or concessional based on engine capacity)
    
  • Used electronics: 18%
    
  • Used furniture or clothing: 5% or 12% depending on HSN
    
• No input tax credit allowed on purchase when using margin scheme
  
• Must clearly mention “Used goods sold under margin scheme” on invoice
  

Second-Hand Vehicles Special Case

• GST is charged on margin if input credit was not claimed earlier
  
• If depreciation under Income Tax Act is claimed, margin = sale price – depreciated value
  
• Applicable rates vary based on vehicle engine size and fuel type
  
• Exemption exists for sales by individual (non-dealers)
  
• Notification 10/2017-Central Tax (Rate) provides detailed rate chart
  

Trade by Unregistered Persons

• No GST is payable when individuals sell second-hand items casually
  
• Dealers purchasing from unregistered persons are taxed on margin
  
• Record of purchase, condition, and valuation must be maintained
  
• Dealer must be registered under GST to apply margin scheme
  
• Unregistered occasional sellers not liable for compliance
  

Compliance and Invoicing

• Maintain stock register and valuation details for each item
  
• Invoice must specify margin-based valuation method used
  
• HSN code and rate must match with GST return filings
  
• Cannot claim ITC on repair or refurbishment if margin method is adopted
  
• E-way bill required if value exceeds threshold and movement takes place