The Authority for Advance Rulings, Gujarat in the case of M/s. JITENDRA EQUIPMENT vide Case No. GUJ/GAAR/R/2025/05 (In Application No. Advance Ruling/SGST& CGST/2024/AR/09) dated 21.03.2025, has ruled that Rule 32(1) makes it optional to adopt special valuation methods. Nothing in the CGST Act or Rules mandates uniformity across business verticals under the same registration.

Facts of the Case: In this case, the Applicant is engaged in the business of trading of construction machineries & equipment like bulldozers, JCB, etc. In addition to this the Applicant is  planning to introduce a new business i.e. dealing in second hand goods in the field of equipment and machineries via the same registration number. Presently, the applicant is not dealing in second hand goods. The applicant intends to take benefit of margin scheme to discharge GST as per rule 32 (5) of the CGST Rules, 2017. 

They have sought clarifications regarding the applicability of Rule 32(5) (margin scheme) of the CGST Rules, 2017, including its optional nature, applicability to purchases from unregistered/registered dealers, computation of margin, ITC eligibility, and RCM implications.

Issue: 

a. Whether Margin scheme as per Rule 32(5) can be opted only for second-hand goods business, while continuing regular valuation for the existing business of new machinery.

b. Whether margin scheme can be applied for purchases from unregistered persons, and adopt regular GST for purchases from registered dealers (with ITC benefit).

c. Whether the purchase price includes cost of repairs/improvements. Further, If repair/improvement cost isn’t part of purchase price under Rule 32(5), can the applicant claim ITC on such cost?

d. Whether e-way bill/e-invoicing applicable under margin scheme. If yes, which value should be declared, and in which section?

e. Whether any GST is payable under reverse charge or forward charge for purchases from registered/unregistered persons?

AAR’s Rulings: 

The AAR observed the provisions of Rule 32(5), CGST Rules, 2017, Notification No. 10/2017 – CT (Rate), dated 28.06.2017 (exempting intra-State supplies of second-hand goods received from unregistered persons by a registered person dealing in such goods and paying tax under Rule 32(5), FAQs and Flyers issued by CBIC. 

The AAR ruled as under:

A. Opting Margin Scheme for new Business:  The applicant may apply Rule 32(5) to their second-hand goods business while continuing with regular valuation for the existing business. Rule 32(1) makes it optional to adopt special valuation methods. Nothing in the CGST Act or Rules mandates uniformity across business verticals under the same registration.

B. Purchases from unregistered persons: The applicant is free to choose margin scheme only for acquisitions from unregistered persons, and adopt normal GST mechanism (with ITC) for purchases from registered dealers. There is no restriction under law for selective application of valuation methods based on the nature of the supplier.

C. Inclusion of cost of repairs/improvements in the purchase price and ITC implications: The term “purchase price” in Rule 32(5) refers strictly to the price paid to acquire the goods from the previous owner, excluding any subsequent costs incurred like repairs, refurbishment, or improvement. Only purchase price is considered, not incidental costs.

The applicant cannot claim ITC on repair or improvement costs incurred on second-hand goods if opting for the margin scheme. Rule 32(5) clearly mandates that the scheme is available only when no ITC is availed on the purchase of goods.

D. Requirement of e-way bill/e-invoicing applicable under margin scheme: No Rulings, as the same is not covered under Section 97(2) of the CGST Act. Outside the jurisdiction of AAR,

E. Reverse charge liability for Tax on Purchase from Registered/Unregistered Persons: For Registered Supplier: Forward charge applies; buyer need not pay RCM. For Unregistered Supplier: No RCM applicable, exempted under Notification No. 10/2017-CT (R) if the buyer pays GST on margin as per Rule 32(5).