TMI Blog2019 (6) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... and tax liability will have to be discharged accordingly. Classification of goods - Rate of tax - Antique jewellery - Antique Watch - Antique Book - Collectibles and Memorabilia - whether classifiable under HSN Code 9706 or otherwise?. Paintings bought from individual art collectors - HELD THAT:- The applicant has requested for classification of paintings bought from individual art collectors. Chapter 9701 of the GST Tariff, 2017 covers Paintings, drawings and pastels, executed entirely by hand, other than drawings of heading 4906 and other than hand-painted or hand-decorated manufactured articles; collages and similar decorative plaques . If the said paintings as mentioned by the applicant answer the description of item mentioned in Heading 9701, then the goods will be covered under this Heading and will attract a rate of 12%. Paintings cannot be treated as used and therefore the applicant must pay GST of 12% on the sale value, if their goods answer the description of Heading 9701. Old Cars - HELD THAT:- For the applicant to avail the benefit of lower taxes under the said Notification, the conditions mentioned therein must be fulfilled. Except submitting that they are d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under the various sub headings of Chapter 49 of the GST Tariff as the case may be. The Residual Entry mentioned above is only applicable to goods which are not specified in Schedule I, II, IV, V or VI. The specific details and description of collectibles (books) has not been mentioned by the applicant and in the absence of specifics the question cannot be answered. Antique Books - HELD THAT:- Such articles will be covered under Tariff item 9706 00 00 only they are exceeding 100 years of age. If the antique books are under 100 years of age then they will be classified under the appropriate heading of the GST Tariff. Antique books of less than 100 years of age, if it is in the form of printed books, newspapers, pictures, etc, will fall under the various sub headings of Chapter 49 of the GST Tariff as the case may be. Since the specific details and description of collectibles (books) has not been mentioned by the applicant, in the absence of specifics the question cannot be answered. Collectibles/Memorabilia (Articles such as clothing, sporting equipment s, books, autographs, photographs and such other items) - HELD THAT:- In absence Of specifics this question cannot be an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of such goods. The goods are sold to the highest bidder in the auction. 5. standard business process of Applicant is as under: (i) Intending seller and Applicant sign an on approval contract wherein intending seller agrees to sell his goods to the applicant on approval basis at mutually agreed price. (ii) On receipt of goods on approval and being satisfied with quality and authenticity of the goods, Applicant uploads the details of goods for online auction. (iii) The goods remain in the possession of Applicant during the mutually agreed period of approval. Applicant has right to retain or return the goods during the approval period. Either approval is granted by Applicant within 6 months from the date on which it receives the said goods and purchases the same at mutually agreed price or returns the said goods to the intending seller. (iv) After conveying the approval and confirming purchase of goods, Applicant sells the goods to buyer in auction. (v) Applicant attracts buyers for the auction in the following manner: a. It maintains a list of buyers who have previously interacted and/or purchased any good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % on sale value HSN Code: 9701) 12% on difference between sale price and purchase second hand goods as provided under Rule 32 (5) Cars: New cars 28% on sale value (HSN Code: 8703) 28% on sale value (HSN Code: 8703) Old cars 18% on sale value (HSN Code: 8703) Based on Notification No. 08/2018 dated 25.01.2018 18% on difference between sale price and purchase price considering car as second hand goods as provided under Rule 32(5) of CGST Rules. (HSN Code: 8703) Jewellery: New Jewellery 3% on sale value (HSN code: 7113) 3% on sale value (HSN code: 7113) Old Jewellery 3% on sale value (HSN code: 7113) 3% on difference between sale price and purchase price considering jewellery as second hand goods as provided under Rule 32(5) of CGST Rules. (HSN Code: 7113) Antique Jewellery of an age exceeding on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale value (HSN Code: Residuary Entry - Serial No. 453 of Schedule III - Goods which are not specified in Schedule l, II, IV, V or Vi) 18% on difference between sale price and purchase price considering watches as second hand goods as provided under Rule 32(5) of CGST Rules. (HSN code: Residuary Entry - Serial No. 453 of Schedule III - Goods which are not specified in Schedule I, II, IV, V or VI) Antique Books 12% on sale value (HSN Code: 9706) or on different between sale price and purchase price considering books as second hand goods as provided under Rule 32(5) of CGST Rule. (HSN Code: 9706) 0% on sale value (HSN Code:4901) Collectibles/Memorabilia: Articles such as clothing, sporting equipments, books, autographs, photographs and such other items Applicable rate of said items Residuary Rate (18%) by treating collectibles and memorabilia as separate class of goods (HSN Code: Residuary Entry - Serial No. 453 of Schedule III - Goods which are not specified in Schedule l, II, IV, V or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hes 18% on sale value (HSN Code: 9101/9102) 18% on difference between sale price and purchase price considering watches as second hand goods as provided under Rule 32(5) of CGST Rules. (HSN Code: 9101/9102) Collectibles 18% on sale value (HSN Code: Residuary Entry - Serial No. 453 of Schedule III - Goods which are not specified in Schedule l, II, IV, V or Vi) 18% on difference between sale price and purchase price considering watches as second hand goods as provided under Rule 32(5) of CGST Rules. (HSN code: Residuary Entry - Serial No. 453 of Schedule III - Goods which are not specified in Schedule I, II, IV, V or VI) Antique Watches of an age exceeding one hundred years 12% on sale value (HSN Code: 9706) or 12% on difference between sale price and purchase price considering watches as second hand goods as provided under Rule 32(5) of CGST Rules. (HSN Code: 9706) 18% on sale value considering watches as normal watches. (HSN Code: 9101/9102) or on difference sale price and purchase price considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch supply is negative, it shall be ignored. 1.3. The term second hand goods as per Rule 32(5) of CGST Rules would mean used goods as such or after 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. 1.4. All the goods listed in table given in Issues for Determination are coming for sale after being used by the seller or the earlier owners of the goods. Applicant does not perform any process on such goods which changes the nature of such goods. If the goods are procured from registered dealer, Applicant will not claim input tax credit of GST charged by the seller. If the goods are procured from unregistered persons, there is no question of claiming any input tax credit. 1.5. In view of what is stated above, Applicant humbly submits that the goods for which advance ruling is sought are second hand goods as defined under Rule 32(5) of CGST Rules. Hence, same should be valued at difference between the sale price and the purchase price. GST should be charged at applicable rate on such difference only and not on sale value/transaction value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articles iv. Collectibles and Memorabilia Extract of relevant rule is enclosed herewith at Annexure 6. 4. The Applicant specifically clarifies that following are not subject matter of the present Advance ruling: a. New cars b. New jewellery c. New watches d. New books e. Paintings bought from Painter (artist) or other art dealers f. Any other new goods (not used or second hand goods) The Applicant is presently paying and will continue to pay GST at applicable rate on full sale value on supply of such new goods and shall take credit of input tax paid on purchase of such goods. Submissions : 1. The Applicant hereby relies and reiterates submissions made by it in the application filed with ARA on 16.10.2018. 2. Further submission as to classification of goods dealt by Applicant: a. Certain goods sold by applicant apparently fall into more than one HSN codes and classification. The applicant seeks advance ruling in respect of classification of such goods: Particulars Alternative 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms Tariff Act, 1975 shall, so far as may be, apply to the interpretation of this notification. The relevant extract of said notification is enclosed at Annexure 3. C. Rule 3(a) of Customs Tariff Act, 1975 is relevant in Applicant s case. It provides that the heading providing most specific description shall be preferred to heading providing a more general description. The copy of relevant extract of Customs Tariff Act, 1975 is enclosed herewith at Annexure 4. d. Applicant humbly submits as under: i. The term antique is defined under section 2 (1)(a) of Antiquities and Art Treasures Act, 1972 as any article, Object or thing which has been existence for not less than one hundred years. The extract of relevant definition is enclosed herewith at Annexure 5. Since there is a specific entry for Antiques of an age exceeding one hundred years in the rate schedule prescribed by Notification 1/2017 Central Tax(Rate), the same should prevail over general entries prescribing HSN code and rates for jewellery, watches, books and other items sold as antiques. ii. Since there is no specific entry for collectibles and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to go by the dictionary meaning or common parlance meaning of the word second hand goods or used goods . The meaning of the terms second hand goods and used goods as per various dictionaries are as under: Second Hand Goods: i. Second-hand things are not new and have been owned by someone else (Collins Dictionary) ii. having had a previous owner; not new (English Oxford Dictionary) iii. not new; having been used in the past by someone else (Cambridge English Dictionary) iv. acquired after being used by another (Merriam Webster) v. previously used or owned (Dictionary.com) Used Goods: i. already owned or put to a purpose by someone else; not new (Cambridge Dictionary) ii. that has endured use (Merriam Webster) d. Your good office will appreciate that as an auction dealer our main business is to sell personal effects such as jewellery, cars, watches, paintings, antiques, collectibles and memorabilia, etc. Most of these are articles used by the original owners or persons selling such goods to Applicant. The antiques, collectibles and memorabilia by very na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market for the first time at a retail shop or any other way. This is the time when the price for the goods is established for the first time. Once the goods are purchased from the primary market and when such purchaser (whether a collector or consumer} decides to sell it, such goods enters the secondary market as used goods or second hand goods. Applicant is a player in the secondary market. Applicant, being an auctioneer dealer, sells art works, personal effects or such other used goods in an auction. The goods sold by applicant form part of the secondary market, as these goods have already been purchased from the primary market. B. Classification issue: Applicant has made detailed submissions on classification of all goods dealt by it in written submission filed in the course of personal hearing. The applicant reiterates following submissions in case of collectible and memorabilia: i. Collectibles and memorabilia generally includes article like clothing, sport equipment, books, autographs, photographs, music instruments, idols, footwear, furniture, utensils, etc. ii. There is no specific classification, HSN code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Swedish Match AB v/s Securities and Exchange Board of India (AIR 2004 SC 4219) = 2004 (8) TMI 389 - SUPREME COURT Government of Andhra Pradesh v/s Road Rollers Owners Welfare association [2004 (6) SCC 210] = 2004 (4) TMI 602 - SUPREME COURT Applicant reiterates that being an auctioneer of used or second hand personal effects, Rule 32(5) of CGST Rules clearly and unambiguously applies to it as person dealing in second hand goods. ii. One of the condition in Rule 32(5) is that no input tax credit should have been availed on the purchase of such second hand or used goods . Usually the dealer in second hand goods or used goods purchases such goods (personal effects) mainly from individuals not registered under GST. Sellers of such goods (being not liable to GST) do not charge tax on goods sold by them to second hand goods dealer. In absence of any tax charged, the question of availing input tax credit by dealer (applicant in given case) does not arise. In such case, dealer has not taken any credit of tax and hence Rule 32(5) clearly and squarely applies on sale of such goods. One may tend to take a view that Rule 32(5) appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Venkataswami Naidu, R vs Narasram Naraindas (AIR 1966 SC 361) = 1965 (4) TMI 122 - SUPREME COURT District Mining Officer vs Tata Iron and steel co. (AIR 2001 SC 3134) = 2001 (7) TMI 1277 - SUPREME COURT Bhatia International vs. Bulk Trading SA (AIR 2002 SC 1432) = 2002 (3) TMI 824 - SUPREME COURT South Asia Industries (Pvt) Ltd vs. Sarup Singh (AIR 1966 SC 346) = 1965 (4) TMI 112 - SUPREME COURT Kartar Singh vs. State of Punjab [JT(1994)2 SC 423] = 1994 (3) TMI 379 - SUPREME COURT Narayanaswami vs. G. Panneersevlam (AIR 1972 SC 2284) = 1972 (4) TMI 95 - SUPREME COURT Rule 32(5) is presumptive scheme of valuation. Such presumptive schemes are iii. promulgated for trade facilitation or for convenience of tax administration. Once such valuation scheme is on the statue book, it is mandatory for assessee as well as tax authorities to follow it in letter and sprit, irrespective of revenue considerations. Once the goods are second hand or used goods, Rule 32(5) is applicable irrespective of value of such goods and irrespective of nature of such goods. D. Sale of second hand or used car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermination of time and value of supply of Goods or services or both; (d) Admissibility of input tax credit of tax paid or deemed to have been paid; (e) Determination of the liability to pay tax on any goods or services under the Act; (f) Whether applicant is required to be registered under the Act; (g) Whether Any particular thing done by the applicant with respect to any goods or services amounts to or result in a supply of goods or services amounts to result in a supply of goods or services, within the meaning of that term. 04. In view of above, the question posed by the applicant may be covered by the clauses, (a), (c) and (e) of section 97 (2) of CGST/MGST ACT, 2017. Hence. the application may be accepted to decide the questions . 05. Facts and Background: The Applicant has filed an application for advance ruling on 16.10.2018 along with statement of facts, issues for determination and the submissions. It is informed that the Applicant is an auctioneer dealing primarily into used personal effects such as jewellery, antiques, watches, paintings, collectibles and memorabilia, etc. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered dealer and there is no incidence of RCM. Hence there is no question of forgo of availment of ITC. The Antique goods means:- The collectable objects have a high value because of its age and quality. The value of antiques is affected by many different factors. The Age, Quality of work and material rarity, condition, Market demand, Manufacturer or kiln mark or autograph of legend. Antiques that are highly sought after but are scarce can usually command a better price. In individual situations another factor is the value attributed to a specific antique by its owner, and the price a collector is willing to pay to obtain it for his/her collection. In other words, this is dependent on the demand and supply situation on the antique market. Therefore, the actual value of an antique may never be the same at two points in time, or in two or more different sales locations. The Antique goods are very special in character and have inherent value cannot be treated as second hand goods. Hence the Rule 32(5) of CGST Rules, 2017 is not applicable. 04. HEARING The Preliminary hearing in the matter was held on 28.11.2018, Sh. Naresh Seth, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored . A reading of the said rule clearly states that in the subject case the value for tax purposes will be the difference between the selling price and the purchase price in case the selling price is more than the purchase price. In the event that the selling price is less than the purchase price, in that case the value shall be ignored, which implies that in such a case there will be no tax liability. This would cover cases where the applicant has purchased the said goods on payment of GST and not availed ITC of such payments made. Another situation can arise in such cases when the seller of the said goods is not liable to register under the GST laws due to the reason of having turnover below the threshold limit. In such a case there will be no payment Of GST and therefore the question of ITC would not arise. In such a situation it is seen that the Government will not get any tax on the sale by the seller. This kind of situation has not been covered under the GST laws and applying the principles of Rule 32 (5) of the CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 32 of the Income-Tax Act, 1961(43 of 1961) on the said goods, the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply, and where the margin of such supply is negative, it shall be ignored; and (ii) in any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored. This notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods. Hence for the applicant to avail the benefit of lower taxes under the said Notification, the conditions mentioned therein must be fulfilled. Except submitting that they are dealing in Old cars, they have not submitted any other details. It is also seen that the provisions of Rule 32(5) of CGST Rules are app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I, Il, IV, V or VI. The details of collectibles has not been mentioned by the applicant and in the absence of specifics the question cannot be answered. (viii) Collectibles (Books):- A collectible can be said to be an item valued and sought by collectors. Collectibles can be any product like a painting, shoes worn by a legend, watches, etc. The applicant has submitted that collectibles (books) fall under Residuary Entry - Serial No. 453 of Schedule III - i.e. Goods which are not specified in Schedule I, II, IV, V or VI. In the subject case the goods, if it is in the form of printed books, newspapers, pictures, etc. will fall under the various sub headings of Chapter 49 of the GST Tariff as the case may be. The Residual Entry mentioned above is only applicable to goods which are not specified in Schedule I, II, IV, V or VI. The specific details and description of collectibles (books) has not been mentioned by the applicant and in the absence of specifics the question cannot be answered. (ix) Antique Books:- Such articles will be covered under Tariff item 9706 00 00 only they are exceeding 100 years of age. If the antique books are under 100 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery and old watches. Question 1.2. The classification and HSN code of goods listed in table given in Issues for Determination and GST rates applicable to such goods. Answer :- (i) Paintings as described by the applicant will be classifiable under Heading 9701 and the applicant must pay GST of 12% on the sale value. (ii) Old Cars:- Motor Vehicles fall under Heading 8703 of the GST Tariff. All the items under 8703 attract 28% GST except Tariff item 870310 10; Sub-heading 8703 80. However old cars attract a lower rate of tax as per Notification No. 08/2018 CT (Rate) dated 25.01.2018. As per the said Notification, the lesser rate of tax i.e. 18 % is applicable to old cars provided the conditions mentioned therein are fulfilled. Except submitting that they are dealing in old cars, they have not submitted any other details. It is also seen that the provisions of Rule 32(5) of CGST Rules are applicable to them, subject to the conditions of the Notification No. 08/2018 CT (Rate) dated 25.01.2018 being satisfied by them. (iii) Old Jewellery:- Articles of jewellery and parts thereof falls under Heading 7113 of the GST Tariff. The p ..... 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