Sale of old ornaments to jeweler will not attract GST, clarifies govt

The government on Thursday clarified that GST won't apply when individuals sell old gold ornaments or cars, in a move that is bound to be of great relief to people who sell old gold jewellery for cash.

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. However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax under RCM will apply, the finance ministry stated in a release on Thursday.

In the GST Ki Master Class held yesterday, in one of the replies given to an on-the-spot-question, it was informed that purchase of old gold jewellery by a jeweller from a consumer will be subject to the 3 per cent GST under reverse charge mechanism in terms of the provisions of Section 9(4) of the CGST Act, 2017.

The finance ministry has now clarified that Section 9(4) of the Act, which mandates that tax on supply of taxable goods (gold in this case) by an unregistered supplier (read individual) to a registered person (read jeweller) will be paid by the registered person (read jeweller) under reverse charge mechanism, 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.

While 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, 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 tax under reverse charge mechanism on such purchases. However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax under RCM will apply.

No GST on education
Also, GST will not apply on annual subscription / fees charged as lodging / boarding charges by educational institutions from students for hostel accommodation;

Services provided by an educational institution to students, faculty and staff are fully exempt from GST, the ministry said.

''It may be mentioned that services provided by an educational institution to students, faculty and staff are fully exempt. Educational institution has been defined as an institution imparting:

• Pre-school education and education up to higher secondary school or equivalent;
• Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force; and
• Education as a part of an approved vocational education course.

Services of lodging / boarding in hostels provided by educational institutions that are providing pre-school education and education up to higher secondary school or equivalent  or education leading to a qualification recognised by law, are fully exempt from GST. Annual subscription / fees charged as lodging / boarding charges by such educational institutions from its students for hostel accommodation shall not attract GST.

Relief to housing societies
Services provided by housing societies and resident welfare associations are exempt from GST and there is no change made to services provided by such societies to its members in the GST regime, although monthly payments to societies above Rs5,000 attract GST.

''It may be mentioned that supply of service by RWA (unincorporated body or a registered non- profit entity) to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs5,000 per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST.'

Further, if the aggregate turnover of such RWA is up to Rs20 lakh in a financial year, then such supplies would be exempted from GST even if charges per member are more than Rs5,000 per month.

However, under GST, the tax burden on RWAs will be lower as they would now be entitled to income tax concessions in respect of taxes paid by them on capital goods (generators, water pumps, lawn furniture etc), goods (taps, pipes, other sanitary / hardware fillings etc) and input services such as repair and maintenance services.

ITC of central excise and VAT paid on goods and capital goods were not available in the pre-GST period and these were part of RWA costs.