Page 192 - GSTL_16th July 2020_Vol. 38_Part 3

430 GST LAW TIMES [ Vol. 38
vidual collectors and users. However, the AAR has held that Paintings/Antique
jewelry/Collectibles/Antique watches cannot be called as ‘used goods’ and
therefore the Rule 32(5) is not applicable here.
48. The said rule is reproduced below :-
(5) 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 the purchase of such goods, the value
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 :
Provided that 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 default-
ing borrower reduced by five percentage points for every quarter or part
thereof, between the date of purchase and the date of disposal by the per-
son making such repossession.
49. The contentions of the appellant can be summarized as follows :-
(1) Paintings/Antique jewellery/Collectibles and emorabilia/Collecti-
bles/Antique watches/Antique Books are used goods. It is coming
for sale after being used by the seller or the earlier owners of such
goods. The applicant does not perform any process on them.
(2) The applicant is not claiming any ITC when such goods are pro-
cured from individual collectors or users as such sellers are URPs.
(3) The terms ‘used goods’, ‘second hand goods’ are not defined any-
where in the Act.
(4) Just because the items are not consumed it cannot be said that they
are not used.
(5) The intention of promulgating Rule 32(5) is to ensure that the dealer
operating in the unorganized sector is not saddled with tax liability
disproportionate to value addition done by him.
(6) If paintings/antique jewellery are not interpreted to mean ‘used
goods’ then the whole purpose of GST legislation will be defeated
as the tax is sought on value addition.
(7) The value of the goods should not be a determinant factor in the is-
sue.
50. Ongoing through the wordings of Rule 32(5) of the CGST Rules, we
find it difficult to agree with the conclusion drawn by the AAR for the following
reasons :-
The rule as it stands does not have any qualification to the words ‘used’
or ‘second hand’. The words themselves are also not explained in the rule. There-
fore, they have to be understood as they are used in common parlance. Defini-
tion of ‘used’ as given in the various dictionaries are as follows :-
• Second-hand things, not new and have been owned by someone
else (Collins Dictionary).
• Having a previous owner, not new (English Oxford Dictionary).
• Not new; having been used in the past by someone else (Cambridge
English Dictionary).
GST LAW TIMES  16th July 2020  192