Margin scheme under GST for used and second-hand goods

Who can use it

Rule 32(5) applies to a registered person dealing in buying and selling second-hand goods, meaning used goods sold as such or after minor processing that does not change the nature of the goods. It also covers goods repossessed from a defaulting borrower, where the repossession value is worked out under the rule.

• Goods must be used or second-hand.
• Any processing must be minor and must not change the nature of the goods.
• No input tax credit should have been availed on the purchase of those goods.

How the value is calculated

The taxable value is the difference between the selling price and the purchase price. If the difference is negative, it is ignored, so no tax arises on a loss-making sale and no refund arises either.

The margin is usually worked out on a per-item basis, which means the dealer needs records linking each sale to its purchase. Dealers in used cars, two-wheelers, phones and machinery commonly use this method.

Practical points

Buying from unregistered sellers is common in this trade, so keep purchase agreements, identity proof of the seller, and payment records. If credit was taken on a purchase, the margin scheme cannot be used for that item and tax applies on the full transaction value.

Invoices should not show tax on the full value when only the margin is taxed. A professional can review the costing sheet and invoice format before you adopt the scheme.

Get it handled for you

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This guide explains the law in general terms as of October 2026. Time limits and requirements can depend on the facts of your case and on the notice you received.