GST: Valuation for Inter-Unit Transaction:

Hello Friends!!

Today we are going discus transaction between related person and distinct person. In Inter-Unit transactions we should always careful regarding tax treatment.

• Pre – GST Era:

Before GST implantation, when branch transfer took place means goods transfer from one unit to another unit, recipient has to issue ‘F’ – Form against material received. Otherwise it was treated as a sale and discharge tax on such transactions.

• Inter-Unit Transaction under GST:

Section 7- Scope of supply under CGST Act 2017, elaborates term transfer and Schedule I specifically covers transaction between distinct persons. Stock transfer or services rendered for other units or offices, it attracts GST even if made without consideration. Then question arises regarding on which value GST is discharge. In section 15- Valuation of taxable supply, prescribes method of valuations. But rule 28 particularly deals with such transactions.

• Valuation Rules under GST:

Rule 28 under CGST Rule 2017, mention how to determine value of supply between distinct person or related persons.

1. Be the open market value of such supply;
2. If the open market value is not available, be the value of supply of ggods or services of like kind and quality;
3. If value is not determined in clause a or b, then rule 30 or rule 31 to be apply;

Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of supplier, be an amount equivalent to ninety percent of the rpice charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person;

Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall deemed to be the open market value of the goods or services.

In this context ruling by AAAR in case of GKB Lenses Pvt Ltd [2018-TIOL-18-AAAR-GST] which held that;

The applicant has the option of not supplying goods to its branches under the first provision of Rule 28 (equivalent to ninety percent of price charged of supply of goods of like kind and quality);

and is eligible to value these goods by applying the term of second provision to rule 28 of the CGST Rule 2017.

• Conclusion:

It is supplier option to decide on which value transfer the stock and discharge GST, and it is assume that value specified in Tax Invoice is Open Market Value. And recipient is eligible to claim full input tax credit.

Jitendra Gurav

B,Com, DTL, GST Tax Practitioner

Mobile – 9823157870. 

Tags: Rule 28 gst, GST