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Sale of old jewellery by an individual to a jeweller will not make the jeweller liable to pay tax under reverse charge mechanism on such purchases

Capital Market 

Section 9(4) of the CGST Act, 2017 mandates that 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 (the jeweller in this case) under reverse charge mechanism. This provision, however, has to be read in conjunction with section 2(105) read with section 7 of the said Act. Section 2 (105) defines supplier as a person supplying the goods or services. Section 7 provides that a supply is a transaction for a consideration by a person in the course or furtherance of business.

Even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course or 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. Accordingly, the sale of old jewellery by an individual to a jeweller will not attract the provisions of Section 9(4) and jeweller will not be liable to pay under reverse charge mechanism on such purchases. However, if an unregistered supplier of gold ornaments sells it to registered supplier, the under RCM will apply.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, July 14 2017. 10:39 IST
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