The Maharashtra Authority of Advance Ruling (AAR) consisting of Rajiv Magoo and T.R. Ramnani has ruled that the 12% GST is payable on the sale of second-hand paintings.
The applicant, M/s. Saffron Art Private Limited, is in the business of procuring paintings on an approval basis from unregistered and registered persons and selling them by auction to the highest bidder.
The applicant displays the paintings on its website and conducts a sale by way of an online auction to the highest bidder. The assumption of the applicant is that its suppliers have brought the second hand or used paintings and then offered them for sale to the applicant. Therefore, for determination of the liability to pay tax on the sale of second-hand or used 'paintings', the applicant can apply Rule 32(5) of CGST & MSGST Rules, 2017 and pay tax on the difference between the selling price and the purchase price. The applicant is charging 12% GST on the entire price for which the second-hand or used 'painting' is sold.
The applicant has sought an advance ruling in respect of the classification of second-hand or used paintings. Yet another issue raised was whether for determination of the liability to pay tax on the sale of second-hand or used 'paintings', the applicant can apply Rule 32(5) of the CGST & MGST Rules, 2017.
The AAR noted that the applicant purchases and sells second-hand paintings and does not avail ITC on the purchases of the second-hand paintings. Therefore, the provisions of Rule 32(5) of the CGST & MSGST Rules, 2017 are applicable to the sale of such paintings. The tax shall be paid on the difference between the selling price and the purchase price and, where the value of such supply is negative, it shall be ignored.
The AAR observed that the second-hand paintings are classifiable under Heading 9701 of the GST Tariff. The provisions of Rule 32(5) of the CGST Rules will be applicable to the applicant in respect of second hand, i.e., used paintings which are purchased by them and then sold.