This Article discusses on liability of GST on Stock Transfer from the Head Office in one State to its Branches in other States and GST credit on Stock transfer.
For the purpose of understanding the questions involved, following relevant provisions of the GST law are highlighted:
(i) . Rule 28 deals with valuation of a supply when it is made between distinct or related persons. If a person obtains or is required to obtain more than one registration in more than one State and/or Union Territory, then, in accordance to the provisions under Section 25 of the GST Act, each registration shall be treated as “distinct persons” for the Purpose of the GST Act. When Head office in one State Supplies to its Branches in other state, qualify as supplies made between the distinct persons and provisions of Rule 28 will be applicable for valuation of such supplies.
(ii) Rule 28 provides that the value of a supply to a distinct person shall be the open market Value, if available, of such supply.
The First Proviso states that “Provided that where the goods are intended for further supply as such by the recipients, the value shall, at the option of the supplier, be an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer, not being a related person”.
The Second Proviso to Rule 28 states “Provided further, that where the recipient is eligible for full input tax credit, the value declared in the Invoice shall be deemed to be the open market value of the goods or services.
(iii) The First Proviso to Rule 28, thus, is clear that where goods are supplied to a recipient for
further supply as such, the valuation of these goods when transferred from the supplier to the recipient may, at the option of the supplier, be determined at 90% of the price that will be charged by the recipient to its customer, not being a related person. The two clauses important to note in this Proviso are: a) goods received by the recipient are to be sold to a customer not being a related person and b) the determination of value at 90% of the price that will be charged by the recipient to this customer is an option. Whether or not the Supplier avails of this option is solely the discretion of the Supplier.
(iv) The Second Proviso to Rule 28 does not mention, unlike the First Proviso, “where goods
are supplied to a recipient for further supply as such”, nor is the Proviso barred to such goods when further supplied as such. In other words, the Second Proviso is applicable for both, goods further supplied to non related customers and to goods used in and for the course of business. It is stated that the value declared in the invoices shall be deemed to be the open market value of the goods.
(v) Chapter V of the GST Act in Sections 16 to 21 are related to Input Tax Credit. The Independently registered business establishments i.e. Branches in different states with Head Office in one State are eligible to avail of Input Tax Credit in terms of Section 16 of GST Act. Again, as per Section 17(1) where the goods (or services, or both) are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
On careful analysis of the above provisions, it is clear that Supplier (Head office/ Branch offices) has the option of not supplying goods to its Branches/ Head Office under the First Proviso of Rule 28 and is eligible to value these goods by applying the terms of the Second Proviso to Rule 28 of GST Act. And hence, the value declared in the invoices shall be deemed to be the open market value of the goods. And if the supplier supplies the goods at Zero Value, obviously, no GST shall be charged/ mentioned in the respective invoice or any other document valid under Section 16(2)(a) of GST Act. Accordingly, The expression “where the recipient is eligible for full input tax credit”, is to be considered in the light of Section 17(1) of GST Act, to mean that the recipient will be eligible to take full input tax credit of the amount of tax paid by the suppler as mention in the respective invoice or any other document valid under Section 16(2)(a) of GST Act. if the value declared in such invoice is zero, no GST shall be charged in the respective invoices and no input tax credit is available to the recipient.
Conclusion
From a plain reading of law laid down under section 16 of the GST Act, it is clear that, inter alia, input tax credit is available only when the recipient is in possession of a tax or debit note issued by the supplier registered under the GST Act, and in case of a supply between distinct and/or related persons, as between Head Office and Branches, the value declared in the invoice shall be deemed to be the open market value of the goods or services supplied. It is therefore clear that if the value declared in such invoice is zero, no input tax credit is available to the recipient.
Author Bio
Dear Sir,
We have two GSTN in two separate state but with same PAN, we are not eligible to take credit as our finish product is not under GST. Now we have capital goods in our stock and want to transfer to another state godown. which is also not for further sale but to have capital installation. whether such stock transfer of capital goods is liable to GST. Because the premises of another state is also we are ineligible to take credit.
Dear Sir,
We are in business of wholesale medicine which is a proprietary firm and the GST is in my father’s name.
now i am taking over this firm and applied for the gst number in my name.
pls suggest how to transfer the current stock from my fathers gst number to my gst number and do i have to pay any gst for the same..
A company purchased PP bags from a supplier in Mumbai and then shipped them to
their Hubli office on their own vehicles. CGST and SGST was paid on this purchase with
the place of supply as Maharashtra
Cost of goods: 20,000 The PP bags are then used by the Hubli office to pack sugar and sell both within and
outside the state. GST is paid over the sales.
● Calculate the GST paid by the company in this case
● Can the SGST paid to the PP bags supplier in Maharashtra be used to get input
credit against these sales?
● How can the company claim this input credit? Show calculations on how much
can be claimed by this method
I have 2 Gst registration under one premises.can I transfer goods from one gst no.to another number.Bcz Import is processed through one registration only.
Dear Sir,
Our factory is in ROHTAK, Haryana. We transfer stock to Om logistics in Banglore and from there supply to customer.
Is stock transfer comes under GST?
Can we transfer stock without gst? And when customer will need material in banglore then we will make invoice with gat.
Pl. suggest
9643832441
Sir,
We have two orders of the High Court of Telangana and High Court of Kerala, wherein it is held that when there is stock transfer, no taxable event takes place and thus no GST applicable. Further, it is also viewed that in case of stock transfer there is no element of supply of goods or services. Please share your insight
Thanks
Case Reference:-
(1) ABCO TRADES (P) LTD Vs. THE ASSISTANT STATE TAX OFFICER WP No. 17377-2020-HC-Kerala
(2) SAME DEUTZ-FAHR INDIA (P) LTD Vs. State of Telangana WP No. 13392-HC-Telangana.
We have three units 2 is in Telangana and 1 is in Andhra Pradesh and we have consolidated Balance sheet and One PAN and CIN No and our turnover is 75 Crores. We are eligible for e-Invoice from April 1 2021 onwards.
In my case from Andhra Pradesh to Telangana stock transfers is there and it is not for sale only semi finished product has been transfer from AP to Telangana then after completion of final process in Telangana we can export from Telangana. Previously we have raised Tax Invoice from AP to TS and paid IGST 18% and file the GSTR 1 returns and this will reflect in our Books of Accounts under Stock Transfer not for Turnover.
Now the GST council mandatory for issuance of e invoice in my case how to proceed for stock transfer from AP to TS please clarify.
We have three different units two in Telangana in one GST No and another one in Andhra Pradesh in different GST No. My intention is in Andhra Pradesh we are manufacturing one product and this product (Semi Finished) transfer to our Telangana Unit for further process and export. Is it applicable to prepare E-Invoice. This is not for sale only stock transfer and this is not reflected in our Turnover.
Dear Sir,
we need your advice in following case:-
1. Services provided to customer by the Registered Branch Office but bill raised to the customer by head office. in this case how can we transfer unutilized ITC of Registered Branch to Head Office?
Dear Sir,
we need your advice in following case:-
1. Services provided to customer by the Registered Branch Office but bill raised to the customer by head office. in this case how can we transfer unutilized ITC of Registered Branch to Head Office?
Hi Sir,
I have two plant in same district with one GSTN. I have one question and doubt, can i transfer any materials (RM/PM/Spare) from one unit to another unit (Inter-Unit Transfer). if yes then what would be implication on tax benefit .
According to schedule 1(Supply made even without consideration) in scope of supply u/s sec 7 mentions that transfer from distinct persons having registration in one or more states is liable to GST. Even the supplier has two registration in same state( head office and branch office) the transfer between these two places is also liable to GST.
Dear Sir,
Thank you for giving clear guideance.
dear sir,
i would like to ask that i have registered person under GST in karnataka and now i wanted to close this firm and start new firm in other state so what i will do for transfer of goods. please guide me.
thanking you
AS PER INCOME TAX ACT WHAT IMPLIES STOCK TRANSFER FROM BRANCH TO BRANCH? IS IT TREATED AS SALES? IF IT IS NOT TREATED AS SALES, PLEASE TELL ME REASON.
UNDER GST REGIME, STOCK TRANSFER IS TREATED AS SUPLY OR SALES? CAN WE TAKE THESE TYPE OF SALES TREATED AS TURNOVER OF COMPANY?
Hi Sir,
I have two plant in same location with one GSTN. I have one question and doubt, can i transfer any materials (RM/PM/Spare) from one unit to another unit (Inter-Unit Transfer). if yes then what would be implication on tax benefit . Also i am taking benefit of “Scheme of budgetary support under Goods and Service Tax Regime to the units located in States of North East (Guwahati).
we two concern A and B have different GSt number
if stock transfer stock from a to b , is it taxable for this stock transfer
please clarify
Hello Sir,
We have received work order of solar pump for supply installation commissioning and testing of solar pumps at various villages in the various district and this process will be given more than 2 months.
we are sending this material on delivery challan to beneficiaries site this is process is right in GST regime.
If wrong hence please provide us right process.
if we are transferring material to our interstate branch but interstate branch doen not have gstin as of now.so if we mention as URP & after geiing gstin of interstate branch if we file GSTR1 of head office with this GSTIN can our interstate branch receive tax credit?
We have our head office at Mumbai and our Factory at Pune. We get orders from customers at our Mumbai Office and they want invoice from Mumbai Address only. But our products are manufactured in Pune. Can we invoice from Mumbai and despatch the goods from Pune. How to prepare E-WAYBILL for the supply of goods. Your valued opinion is solicited sir,
if we are transferring material to our interstate branch but interstate branch doen not have gstin as of now.so if we mention as URP & after geiing gstin of interstate branch if we file GSTR1 of head office with this GSTIN can our interstate branch receive tax credit?
We need your advice on following two question.
1. We are in business of chemical manufacture. If we are purchasing some GST taxable item from unregister vendor, vendor not charge GST due to they haven’t GST registration.
Question: Is it GST exempted supply? If yes, where it show in GSTR 3B?
2. We have two unit in Gujarat state with single GST registration. If we are transfer some material from one unit to another unit in same state.
Question: What type of transaction it is? GST applicable or not? Where to show in GSTR 1 & GSTR 3B?
MATTER IS NOT CLEAR. DURING EXCISE STREAM EXCISE WAS CHARGEABLE WHEN GOODS ARE REMOVED FROM FACTORY.
WHAT WILL HAPPEN TO GST
I agreed with Gara Venkata Raman, we can invoice upto 90% of the value of final party or open market value which cannot be zero.
Dear sir,
thank you for sharing your view, but as per the gst rules we have to take the transaction value @ 90%, if you issue a invoce without value (say ZERO), it is violaiton of rules. i think STO is chargable ot tax.