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GST ON INTER BRANCH TRANSFERS

Friday, September 8

A novelty under the Goods and Service Tax Act is the fact that the inter branch transfers are also taxable under it. This means that if a branch office transfers goods or renders services to another branch under a common entity, GST shall be applicable on that. However, a complete analysis of the provisions of GST has to be made. As per the GST provisions, every supplier is required to get registered in the State/UT from where he makes a taxable supply of goods/services, if his aggregate turnover in a financial year exceeds Rs. 20 lakhs (Rs. 10 lakhs in case of special category states). Aggregate turnover has been defined as “the aggregate value of all of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same PAN, to be computed on all India basis. Further, it has been stated that where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons and any supply between two distinct persons even if without consideration shall be treated as a supply under GST. (Section 24, Section 25 read with Schedule I). Combined reading of the above provisions implies that all the branches of a person situated in different states and from where the person is making taxable supply shall be liable to be registered if the aggregate turnover of the person computed on all India basis exceeds Rupees Twenty Lakh (Ten Lakh) in a financial year. In case, the state has more than one branch and/or warehouse location, one location shall be shown as principal place of business and others as additional place of business. Since branches in different states will be treated as distinct entities, any stock transfer from one branch to another will be treated as a “supply” under GST provisions. However, any intra-branch transfer under the same GSTIN will not be taxable because the concept of distinct entity shall not arise in this case. INVOICING: All inter-branch transfers, since treated as a normal supply under GST provisions, will be effected under a tax invoice and all intra-branch transfer under same GSTIN can be effected under delivery challan.

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