GST on second-hand mobile phones: the margin scheme
A GST-registered dealer in second-hand phones can pay GST only on the margin — the selling price minus the purchase price — instead of on the full sale value, under Rule 32(5) of the CGST Rules, 2017, as long as no input tax credit was claimed on that purchase. If the margin on a phone is negative, it is ignored.
Last reviewed: 11 October 2026
Who can use the margin scheme
- You deal in buying and selling second-hand goods, such as used phones.
- The phone is sold as it is, or after only minor processing that does not change its nature. A phone that is substantially refurbished or upgraded is taxed on its full sale price.
- You have not claimed input tax credit on the purchase of that phone.
- The scheme is optional. A dealer may choose to pay GST on the full value instead.
How the taxable value is worked out
The value of supply is the difference between the selling price and the purchase price, worked out phone by phone. A loss on one phone does not reduce the margin on another.
Example: you buy a used phone for ₹8,000 and sell it for ₹9,500. The margin is ₹1,500, and GST applies to that value, not to ₹9,500. If you had sold it for ₹7,500, the margin would be negative, and no GST would be payable on that sale under the scheme.
Mobile phones are taxed at 18% GST at the time of writing; check the current rate, and settle with your CA whether your sale price is treated as including GST when you work out the margin.
Buying from customers who are not registered
Most used phones are bought from individuals who have no GST registration. Notification No. 10/2017-Central Tax (Rate) exempts intra-state supplies of second-hand goods from an unregistered supplier to a registered dealer who pays tax on the margin under Rule 32(5), so the dealer does not pay tax on that purchase under reverse charge. State GST laws carry matching provisions.
Records that make the margin scheme hold up
The scheme depends on proving the purchase price of each phone and that no input tax credit was taken. For every phone, keep:
- the purchase document — a bill from the seller, or the seller's signed declaration with their identity;
- the IMEI, so the purchase and the sale can be matched one to one;
- the sale invoice;
- a stock record that shows the phone moving from purchase to sale.
Large UPI or bank receipts do not by themselves show that the whole amount is taxable; the purchase records are what establish the margin.
Mobile Praman keeps the purchase and the sale of each phone on the same IMEI record and makes margin-scheme bills from it.
Frequently asked questions
- Is the margin scheme compulsory for second-hand phone dealers?
- No. It is optional. A dealer can instead pay GST on the full sale value and follow the normal rules for input tax credit.
- Can I claim input tax credit on phones I sell under the margin scheme?
- No. The scheme applies only where no input tax credit was claimed on the purchase of those goods.
- What if I sell a phone for less than I paid?
- The negative margin is ignored, so no GST is payable on that sale under the scheme. It does not reduce the margin on other phones.
- Do I pay GST when I buy a used phone from a customer?
- For an intra-state purchase from an unregistered person by a dealer who pays tax under Rule 32(5), Notification 10/2017-Central Tax (Rate) exempts that purchase.
- Does the margin scheme apply to a refurbished phone?
- Only if the processing is minor and does not change the phone's nature. Substantial refurbishment means GST on the full sale price.
Sources
This page is general information, not tax advice. For your own registration and returns, check with your CA.