Most of the businesses have multiple registrations under one headquarter.

According to the CGST Act, when there are multiple depots or branches of the same business involved, all these branches or depots will be treated as individual GST registered persons.


Hence, inter-branch transfer of goods or services or both will attract a GST on them.

This short article will discuss the GST provisions for these inter-branch transfers of goods or services or both. We will also read this article in light of the specific sections related to the inter-branch transfer of goods & services from the CGST Act, 2017.

Inter-unit Supplies in GST & Section 25 (4) of the CGST Act, 2017

The verbatim of this section is as follows:

A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.

In simpler words,

Every branch or depot with individual GSTINs belonging to one company will be treated as an individual entity.

This holds irrespective of the geographical location of the branches. Thus, all the units can be located in the same State/ UT or different States/UTs.

Hence, the supply of goods and services between these branches or depots will be taxable under GST as per this section.

How is the valuation of inter-branch supplies calculated?

The value of the supply of goods & services is determined as per the directions given in Rule 28 of the CGST Rules of 2017.

Rule 28 of CGST Rules of 2017

Rule 28 of CGST Rules, 2017 defines the value of supply of the goods or services between the related or distinct persons, other than agents.

So, when there is a movement of supply of goods or services or both between the branches of the same business, the value of the supply is determined as per Rule 28 considering the following factors:

  • Open market value of such supplies
  • If the open market value is not available, the value of supplies of a similar kind will be considered.
  • Suppose the value of the supply is undeterminable by application of Rule 30 & 31. In that case, the value shall be equivalent to 90% of the price charged for the supply of the goods or services of a similar kind by the recipient to a customer not related to the business or entity in question.

Definition of Related Persons under GST

  • An employer & an employee
  • Businesses legally recognized as partners
  • Any person holding a minimum of 25% shares in another company either directly or indirectly
  • Entities together controlling another entity
  • A promoter or managerial person belonging to the same family
  • When the officer in charge of one business is the director or officer in charge of another business
  • When these entities are under joint management

Definitation

Section 2 (84) of the CGST Act defines the 'Related Person in GST' if the person falls in one of the categories mentioned below:


Definition of Persons

Individuals, Companies, Branches of the same company, local authority, government, firms, LLPs, HUF.

Persons may also include entities from the same company outside Indian geographical locations.

Invoicing provisions for inter-branch supplies

All the inter-branch transfers in a company are treated as regular supply under GST.

These inter-branch supplies of goods or services between the branches located in the same State/UT or different State/UT shall be effected under the tax invoice.

In case of the inter-state supplies between the branches, E-way Bill should be generated if the consignment value of the goods exceeds Rs. 50,000.

E-way Bill generation in GST is mandatory for the movement of goods whose value exceeds the threshold limit of Rs. 50,000.

GSTHero offers an E-way Bill Tally connector to generate E-way Bills directly from your Tally ERP.

This saves your business time as you do not need to visit the E-way Bill portal multiple times. This feature is handy when you have numerous E-way Bills to be created.

However, if the supplies are made within the same State or UT, they shall be effected under Delivery Challan.

Conclusion

This article has discussed the GST provisions related to the inter-unit supplies of goods or services within the same company.


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It is essential to note that the units to which the supply is made should have an individual GSTIN to apply these principles.

GSTHero has a wide variety of automated solutions to cater to all the GST needs of the taxpayers.

You can visit our GST related product page here & get the free demo of our products.

Stay updated; stay ahead!


Gaurav Yadav

About the author

Gaurav is an Engineer by training with a deep interest in Economics & Finance. He has been associated with the Fin-Tech industry for quite some time now. He writes for GSTHero for topics including GST Compliance, GST Structure, etc & aims to break down complicated technical jargon into simple terms for the taxpayers.

His expertise includes GST Laws, Corporate Finance & Macro-Economics.

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