Valuation of Second Hand goods – How valuation is done for Second hand goods as per GST valuation rules
by Paras Mehra 3.93K
Introduction
Valuation of any supply of goods or services under GST shall be the transaction value if price is a sole consideration and supplier and recipient are not related.
However, in some case, the valuation is been shifted to valuation rules under GST. Out of many, there is a case of second hand goods. The value of second hand goods under GST shall be calculated as prescribed under GST rules.
Value of second hand goods
Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e.
- 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
the value of supply shall be the difference between the selling price and purchase price and where the value of such supply is negative it shall be ignored.
Example: Suppose Mr. A buys a second hand cycle from different houses @ Rs500 each and then sell them after making little repair @ 700 each. Now in this case, we have complied with the requirements as stated in the rule which are follows:
- We are dealing in used goods
- We have done little repair which do not change the nature of the goods
- We have purchased from households and hence no question of ITC claimed.
Therefore, the value of second hand cycle shall be Rs.200 (Rs.700 – Rs.500).
What if the conditions are not fulfilled?
As per se, there is no clarification as what will happen if conditions are not fulfilled. However, as per the interpretation, the GST valuation then shall be done on transaction value.
Important point from Loan defaulter
However, the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.
Why valuation is so important
Valuation is something which is directly linked with the government tax revenue and hence is off prime importance. This is because it values the goods and services less, then the ultimate tax shall be less. Therefore, getting the correct valuation is very important.
Conclusion
If you are still confused, then drop your query on info@hubco.in.
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