GST AAAR Clarifies Margin Scheme Applicability U/R 35(5) for Sale Used Batteries, Plastic Waste

The Margin Scheme as foreseen under Rule 35(5) of the Central Goods and Services Tax (CGST) Rules, 2017 shall be applied to the sale of used lead acid batteries, plastic waste and scrap from aluminium, steel, copper and brass utensils, as stated by the Rajasthan Appellate Authority for Advance Ruling (AAAR).

Appellate Authority provides the ruling while entertaining an application submitted via Hitesh Gwalani, a supplier of waste papers who monitors the business of buying and selling various goods such as old and used iron scrap, scrap copper, used lead acid batteries, plastic bags, used aluminium utensils and goods, old brass and steel utensils and PET bottles and worn out tyre tubes.

The appellant contested that if the purchase of goods from unregistered suppliers and resale to distinct manufacturers on the GST charging on the difference between the selling and purchase price of the old goods, shall entitled under the Margin Scheme reported under Rule 32(5) of the CGST Rules.

The applicant was not pleased via the preceding application to the Authority for Advance Ruling (AAR) which denied the Margin Scheme applicability to the case of the petitioner quoted that the related goods could not be regarded as ‘second-hand goods’ as they are scrap referred to as consumed/melted for the manufacture of new items, leading to a change like goods.

The two-member Bench of Mahendra Ranga, Member (Central Tax) and Ravi Kumar Surpur, Member (State Tax) marked that the claim of the applicant of second-hand goods owing to purchase from unregistered suppliers and following sale without any process is not tenable.

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From an example of a used car, the Bench carried that “a second hand car shall be used in the same way as a new car. Thus mere change of ownership is not sufficient to term them as second hand goods under the purview of Rule 32(5) of the CGST Rules, 2017.”

Discovering that the related goods may not be repurposed in their original form they do not validate to test the continuity of usage and are counted within the realm of scrap and not second-hand goods, the Bench directed them ineligible to function under the Margin Scheme under Rule 32(5) of CGST Rules, 2017 till the time the goods are considered scrap.