In today’s world, buying and selling second-hand goods is no longer limited to roadside markets. Platforms like OLX, Quikr, Facebook Marketplace, Cashify, Cars24 and others have made it easy for people to sell and buy used goods online.
However, with the GST law in place, there is a common question:
“Does GST on second-hand goods apply?”
The short answer: It depends on who you are, what you are selling, and whether it’s part of your business.
This guide will explain all rules, exemptions, and grey areas of GST on used goods and online sales.
Table of Contents
1. GST Law on Second-hand Goods – Legal Framework
To understand GST on used goods, you need to know a few key legal points:
- Section 7 of CGST Act, 2017 – “Supply” means sale, transfer, barter, exchange, etc., for consideration in the course or furtherance of business.
- Section 2(105) – “Supplier” is any person supplying goods/services.
- Rule 32(5) of CGST Rules – Special valuation method for second-hand goods (Margin Scheme).
- Notification No. 10/2017 – Central Tax (Rate) – Exempts sale of used goods by an unregistered person to a registered dealer.
- Schedule I – Supply without consideration can be taxable in some cases (business assets).
Core Principle:
If you sell personal goods as an individual (not as a business), it’s not considered “supply” under GST → No GST.
If you sell goods as a dealer or business, GST applies.
2. When GST Does Not Apply
Personal Used Goods Sale
- Selling your own used phone, sofa, fridge, cycle, or books on OLX.
- You are not in the business of selling these goods.
- Example: Selling your old washing machine for ₹5,000 → No GST.
Sale of Exempt Goods
- If goods are exempt under GST, even second-hand sale is exempt.
- Examples: Agricultural produce, unbranded clothes, non-motorised cycles.
Sale to a Registered Dealer under Reverse Charge
- If an unregistered person sells used goods to a registered second-hand dealer under Margin Scheme, the dealer pays GST on margin — seller has no GST liability.
3. When GST on Second-hand Goods applies?
GST applies when:
- You are a registered second-hand goods dealer.
- You are a business selling old assets (like office chairs, laptops, machinery).
- You sell goods on which ITC was claimed earlier.
- You sell scrap generated from business activity.
Example:
- A GST-registered company sells old air conditioners used in office → GST applies.
- A shop selling refurbished mobiles on OLX → GST applies.
4. GST on OLX / Online Platform Sales
| Scenario | GST Applicable? | Rate | Remarks |
|---|---|---|---|
| Individual selling personal used laptop | No | N/A | Not business supply |
| Registered business selling old computers | Yes | 18% | If ITC claimed earlier |
| Second-hand car dealer selling via OLX | Yes | 18% on margin (Rule 32(5)) | Margin Scheme benefit |
| Scrap dealer selling metal scrap | Yes | 18% or 5% depending on item | Check HSN code |
| Company selling used furniture without ITC | Yes | 18% on selling price | ITC status matters |
5. Margin Scheme for Second-hand Goods
Rule 32(5) – CGST Rules says:
- If a registered second-hand goods dealer has not claimed ITC on purchase, GST is payable only on margin = Selling Price – Purchase Price.
- If margin is negative (sold at loss), GST is not payable.
Example:
- Purchase price of used mobile: ₹10,000
- Sell price: ₹12,000
- Margin: ₹2,000 → GST @ 18% = ₹360 only (not on ₹12,000).
Advantage:
Margin scheme reduces tax burden for buyers and keeps used goods affordable.
6. GST on Sale of Business Assets
If a GST-registered business sells its capital goods:
- GST applies if ITC was claimed earlier.
- Tax is charged on the higher of:
- Transaction value, or
- ITC claimed earlier minus 5% depreciation per quarter of use (Section 18(6)).
Example:
- A company bought a printer for ₹1,00,000 and claimed ITC ₹18,000.
- After 2 years, sells it for ₹50,000.
- GST is payable as per valuation rules.
7. Practical Examples
Example 1 – No GST
- You sell your own 2-year-old phone on OLX for ₹8,000.
- Personal use → No GST.
Example 2 – GST on Business Asset
- GST-registered shop sells its old display fridge for ₹20,000.
- ITC claimed earlier → GST @ 18% = ₹3,600.
Example 3 – Dealer using Margin Scheme
- Dealer buys old bike for ₹40,000, sells for ₹50,000.
- Margin: ₹10,000 → GST @ 18% = ₹1,800.
8. Case Laws & Rulings
- AAR – Attica Gold Pvt Ltd (2019): Purchase of used gold jewellery from unregistered person and sale after melting is taxable under Margin Scheme.
- AAR – KST Infrastructure (2018): Sale of used buses after ITC claimed earlier is taxable at applicable GST rate.
9. Common Mistakes & Compliance Tips on second hand goods
- Mistake: Charging GST on personal sales → Not required.
- Mistake: Not maintaining purchase/sale records in margin scheme → May lead to disputes.
- Tip: For dealers, maintain invoices with buyer/seller details for every transaction.
- Tip: Check HSN and GST rate before selling any business asset.
- Tip: If selling via OLX or marketplace, clarify in listing whether GST is included.
10. Key Takeaways
- Normal individuals selling personal used goods → No GST.
- Businesses and dealers → GST applies, margin scheme can save tax.
- Sale of business assets with ITC claimed earlier → GST on transaction value or reduced ITC value.
- Keep proper records and follow Rule 32(5) for second-hand goods.
Conclusion
GST is not a concern for common OLX users selling their own items.
But for dealers, scrap traders, and businesses, GST compliance is important to avoid penalties. The Margin Scheme under Rule 32(5) is the biggest relief, allowing tax only on profit margin instead of full sale value.
By keeping proper records and understanding exemptions, sellers can make second-hand goods trade smooth, tax-compliant, and affordable.
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