GST Rules allow Manufacturers to adopt own value on Inter-State Stock Transfer

By R.S.Sharma Advocate & GST Expert

GST ( Determination of Value of Supply) Rules as okayed by GST Council have come as a breather for manufacturers and service providers who are engaged in inter-state supply of goods and services to self which is now taxable under GST Regime and is subject to IGST(Integrated Goods and Services Tax) with effect from the date of implementation of GST. The amount of IGST payable on inter-state supply is equal to CGST + SGST payable in case of intra-state supply of goods and services. For example; if CGST Rate is 9 per cent and SGST Rate is also 9 per cent; the IGST Rate will be 18 per cent. However, intra-state supply of goods and services to self is not subject to GST. Manufacturers are not liable to pay GST on transfer of goods from factory to own Depot or Branches or showrooms or any other premises within the State when it is not a case of supply of goods to another Company.

Supply of goods and services to another GST Registration Number of own company is treated as supply to distinct person under GST Law and hence taxable. Since separate GST Registration is required in each State; the inter-state stock transfer of goods to own Depot or Branch is subject to GST. However, as no consideration is received by the Company on stock transfer and there is no transaction value of goods; the value for payment of GST is required to be determined in terms of GST (Determination of Value of Supply) Rules.

Though the general rule in cases where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall, be the open market value of such supply; the value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related; 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 goods or services. Since credit of IGST paid on inter-state stock transfer is available in the GST Number of the Company in the State where the goods are being transferred; at the time of supply/sale to another party; the differential GST will be required to be paid in cash if sufficient credit is not available in GST Credit Account of GST Number in the receiving State.

This provision is a welcome step which leaves no scope for dispute on valuation for GST payment in case of inter-state self-supply of goods or services. But the stock transfer will add to the cost of the Company and will affect the cash flow substantially. Having a depot on inter-state Border in the State where goods are manufactured is part of new business strategy being planned by many companies who have already reduced the number of depots to avoid blockage of funds on inter-state stock transfers.

(Writer is a Lawyer based in Gurgaon. He is advising several MNCs, Indian Corporates and PSUs on GST Transition issues. He can be mailed at rssharma@gmail.com )

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