Page 22 - Banking Finance September 2021

LEGAL UPDATE

Leg
Leg al C a se s
Legal Cases
Legal Cal Caasesess
Legal Cases

GST only on profit on re- on the gross sale value received from creditor cannot challenge a resolution
the purchaser. AMRG & Associates plan approved under the IBC with an
sale of second-hand Senior Partner Rajat Mohan said most argument that higher amount should

jewellery: AAR jewellers procure old jewellery from have been paid to it, in light of the
Jewellers will have to pay GST only on common man/unregistered dealers, value of the security interest held by it
obliviating the need for credit of taxes over the corporate debtor, note Netra
the profit earned on resale of second-
hand gold jewellery, Karnataka AAR in the hands of jewellers. Nair, Oorja Chari and Simrann
has ruled. "The Karnataka AAR's decision to Venkkatesan of Vaish Associates Advo-
cates. Writing in Mondaq, the experts
The application to the Authority for charge GST only on the difference be- note that the apex court, recognising
Advance Ruling (AAR) was filed by tween the purchase price and the sell- the supremacy of the commercial wis-
Bengaluru-based Aadhya Gold Private ing price will have a significant impact dom of the CoC, has reiterated the lim-
Ltd seeking clarity on whether GST is on the industry to lower the tax cost ited scope of judicial review and inter-
to be paid only on the difference be- to the final consumer," Mohan added. ference in business decisions that fall
tween the selling and purchase price under the ambit of the commercial
if it purchases used/second- hand gold IBC plan cannot be chal- wisdom of the CoC.
jewellery from individuals and there is lenged The SC has rightly upheld the integral
no change in the form/nature of goods The Supreme Court, in the case of In- principles of IBC that is value
at the time of sale. dia Resurgence ARC Pvt Ltd Vs Amit maximisation of the assets of the cor-
The Karnataka bench of the AAR ob- Metaliks, held that a dissenting se- porate debtor, and insolvency resolu-
served that GST is payable only on the cured creditor cannot challenge an tion, as against liquidation. The SC has
margin between the sale price and the approved resolution plan under the clarified that any entitlement ex-
purchase price, since the applicant was Insolvency and Bankruptcy Code (IBC) tended to creditors on the basis of the
not melting the jewellery to transform and insist on a higher amount to be value of security would defeat the pur-
it to bullion and then recreating it into paid to it on the basis of the value of pose of IBC as it would result in the fi-
new jewellery, but rather cleaning and the security interest held by it over the nancial creditors dissenting and opting
polishing the old jewellery without corporate debtor. It was further held for liquidation as against insolvency
changing the form of the jewellery that, in the scheme of IBC, every dis- resolution, they say.
purchased. satisfaction does not partake the char-
acter of a legal grievance and cannot Appoint HC judges to
Experts said this ruling will reduce the
be taken up as a ground of appeal. NCLT: Finance panel
GST payable on resale of second-hand
jewellery. Currently, the industry usu- Through this Judgment, the SC has Taking a grim view of the sagging re-
ally charges GST at three per cent rate confirmed that a dissenting secured coveries by the banks and a huge de-

22 | 2021 | SEPTEMBER | BANKING FINANCE