Sale of old gold jewellery will not attract GST on exchange

NEW DELHI: The sale of old gold by individuals for a consideration won’t attract the goods and services tax, the finance ministry clarified, providing respite to people who exchange jewellery.

“Even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course of furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se,” the ministry said in a statement on Thursday.

Accordingly, the sale of old jewellery by an individual to a jeweller will not attract the provisions of Section 9 (4) of the GST act and the jeweller will not be liable to pay tax under reverse charge mechanism on such purchases, it said. However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax will apply under reverse charge mechanism. Under this mechanism, the liability of paying tax is on the receiver of goods or services and not on the supplier.

Gold jewellery attracts 3% tax under GST. Section 9 (4) of the Central GST Act mandates that tax on supply of taxable goods (gold, in this case) by an unregistered supplier (an individual, in this case) to a registered person (the jeweller, in this case) will be paid by the registered person under the reverse charge mechanism.

 

  

This provision, however, has to be read in conjunction with section 2 (105) read with section 7 of the act. Section 2 (105) defines supplier as a person supplying the goods or services. Section 7 provides that supply is a transaction for a consideration by a person in the course of furtherance of business, it said.

The clarification will provide relief to individuals selling old gold jewellery to jewellers and buying new ornaments from the consideration received.

An earlier reading of the provision had suggested that the sale of old jewellery would attract GST, which would be levied through the reverse charge mechanism.

Source::: The Economic Times, dated 14/07/2017