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2023 (7) TMI 523 - AAR - GSTValuation - purchase of used / second-hand gold jewellery or ornaments - Difference between the selling price and purchase price as stipulated under Rule 32(5) of CGST Rules, 2017 - purchase of used / second-hand gold jewellery or ornaments from persons who are not registered under GST and that at the time of sale of such goods there is no change in the form/nature of such goods - ITC also not be availed on such purchase. HELD THAT:- If the consumer behaviour related to gold purchase/holding in India is examined, one can safely conclude that marginal utility derived from purchasing and holding gold and gold products never diminishes. It either increases or remain same - In India, gold jewellery is transferred from generation to generation as part of family traditions. Possession of old gold jewellery is also a matter of family prestige in many parts of India. If gold jewellery gets older say 50 to 100 years, it becomes vintage jewellery and if it is more than that, say more than 100 years, it becomes antique jewellery. Needless to say that both categories are costlier. It is also worth mentioning that normally, value of gold will not diminish even if it is exchanged among 10 different users in a span of 2 years as a jewellery piece of 22 carats remains 22 carats even after changing hands. Given the daily market price; Content, Carat (purity) and fineness determine the value of gold jewellery and not the duration of use or holding. Since the duration of use does not affect the value of the commodity in question, the concept of depreciation is not applicable in the case of gold and gold jewellery. By the same logic, dealing with exchange of gold cannot be construed as dealing in second hand goods and the rule 32 (5) is not applicable and Section 15 of the CGST Act 2017, holds good. In the case of usual goods, the peak value in its life span will normally be at the point of retail primary sales to end customers. Such goods will suffer tax at all the value addition points till the peak of its value, i.e., up to the retail sales to the end consumer. The intention of Sub rule (5) to Rule 32 of the CGST Rules, 2017 is to reduce the tax burden on such goods, which have already suffered tax on its highest value, when supplied at a reduced price in the secondary market after usage. But this is not the case with goods such as gold and gold ornaments, where the value is determined primarily by the content, purity and fineness of the material contained therein - the term ‘second hand’ does not hold any meaning when it comes to items such as gold, land, currency etc. In order to qualify for inclusion under the valuation of supply as envisaged under sub-rule (5) of rule 32, it has to be proved that the applicant is dealing in second-hand goods. Unfortunately, gold in any form fails to pass the test of ‘second-hand goods’. Thus, the supply made by the applicant fails to comply with all the requirements specified under Rule 32 (5) of the CGST, Rules 2017. Hence cannot avail of the benefit of provisions stated under sub-rule (5) of CGST rules 2017.
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