GST Margin Scheme for Used Machinery Dealers: AAR Relief Explained
This is a welcome relief for the second-hand goods market, where GST interpretation has long been confusing.
What Is the GST Margin Scheme?
This avoids double taxation and encourages resale markets.
Key Conditions for Using Margin Scheme:
- Both purchase and sale must be under the same GST registration.
Gujarat AAR Ruling Highlights
Case: M/s. Pooja Enterprise
Order Date: 12 July 2024
Citation: GUJ/GAAR/R/2024/XX (actual order number redacted)
Summary:
- The applicant purchased used machinery (capital goods) from various parties without claiming ITC.
Practical Impact for Dealers
✅ Relief Available
If you’re buying and selling under one GST registration (say, at your Ahmedabad branch), and not availing ITC—margin scheme applies.
❌ Relief Denied If:
- You sell through another branch with separate GST registration (say, Surat), even under the same PAN.
- You’ve claimed ITC on the purchase of the used goods.
Expert View: How to Stay Compliant
To claim this benefit safely:
- Keep clear purchase and sale records (including invoice value and party details).
- Do not transfer goods between registrations if you want margin benefit.
📌 Pro tip: Add a “No ITC Claimed – Sold under Margin Scheme” remark on invoices.
Legal Reference
- CGST Rule 32(5) – Calculation of tax on margin for second-hand goods.
- Notification No. 10/2017-CT (Rate) – Specific to margin scheme applicability.
- Gujarat AAR Ruling – Supports intra-state resale without ITC using margin scheme.
Comparison Table: Full GST vs Margin Scheme
| Basis | Full GST on Value | Margin Scheme (Rule 32(5)) |
|---|---|---|
| Tax Base | Full sale value | Sale price – Purchase price |
| ITC Allowed | Yes | No |
| Branch Transfer Allowed | Yes | No (benefit denied) |
| Record Keeping | Mandatory | Strictly enforced |
| Best for | New goods | Second-hand goods dealers |
FAQs
Q1. Can a company with multiple GSTINs claim margin scheme?
No. The benefit is limited to goods purchased and sold under one GSTIN only.
Q2. Is margin scheme applicable to imported used machinery?
Yes, but customs duty and IGST on imports must be paid, and no ITC should be claimed.
Final Thoughts
The Gujarat AAR ruling is a positive signal for used machinery dealers. If you’re careful with documentation and don’t mix registrations or claim ITC, the GST margin scheme can significantly lower your tax burden.
For help with GST invoicing, margin calculation, and compliance across branches—contact Efiletax. We’ll help you structure it right.
Summary
Gujarat AAR confirms GST margin scheme applies to used machinery dealers if goods are sold under the same GST registration without claiming ITC. Rule 32(5) benefit ensures tax is charged only on the margin, offering major relief for second-hand equipment businesses.