GST Update No 222 on movement of goods between two units under same registration

The debate as regards to treatment of intra-unit and inter-unit transactions is never ending and therefore, the tug-of-war between the taxpayers and tax officials remains intact. It is well settled that in race of time, an organisation establishes its different units at different platforms to grow and develop. In such a scenario, the inter stock transfer among these established units increases the headache of assessees. On similar lines, various questions were raised by the appellant before Rajasthan AAR in the case of M/s Mody Education Foundation. The decision imparted in this case is subject matter of our present update.

The appellant is engaged in the business of manufacture of various products such as thermocol, tableware, kitchenware etc. They are availing input tax credit on inputs, capital goods and input services used in manufacturing of final product. Planning is done to expand the business operations and establishing a new unit within the same district under same registration number as additional place of business. The goods would travel between these two specified units. Advance ruling is sought in this respect by raising following questions:

1. Whether movement of goods and raw materials etc. among the two units would come under ambit of supply and therefore, chargeable to GST?

2. Whether E-way bill is to be issued for transfer of goods from one unit to other and at what value e-way bill is to be issued?

3. Whether provisions of job-work apply on the transaction or goods can be sent through simple internal challan?

4. How to deal with ITC available for each unit?

5. Whether separate address of both factories is to be mentioned for purchase of raw materials or capital goods?

6. For invoice of clearance of goods, whether address of different units is to be mentioned?

The appellant interpreted the aforementioned questions as per the prescribed provisions of the CGST Act and opined that the said transaction would not be covered under ambit of supply and therefore, no GST shall be levied in the given case. Further it was submitted that input tax credit shall be pooled under a single credit ledger since to discharge output tax liability.

The AAR after analysing the provisions of the CGST Act, 2017 and taking into consideration the written submissions, answered the questions raised by the appellant. It was held that the above transaction would not fall under the ambit of supply irrespective of the fact that there is involvement of consideration or not since both the units are registered under same GSTIN. Consequently, there would be no GST liability in the present case. Moreover, it was held that transfer of goods between two units, value as determined under Rule 138 of CGST Rules, 2017, shall be considered and e-way bill shall be issued for such transfer. As regards to the question of Job Work it was held that the same does not falls under Section 97(2) of CGST Act, 2017 and therefore, no advance ruling can be delivered on the same. As far as question of ITC is concerned, it was held that both the units will be registered under single GSTIN and therefore, would be eligible to for one input tax credit ledger which shall be used for discharging output tax liability. In respect of next question related to address to be mentioned on purchases made, it was delivered that since the said transaction is not covered under Section 97(2) of CGST Act, 2017, no advance ruling can be delivered in such a case.

The above ruling is in uniformity with the settled CGST Act, 2017 wherein the units registered under single registration number are treated as one and at par with each other. Although, it is well known that the authority for advance ruling is delivering adverse decisions and following pro-revenue approach, yet, it is expected that rulings in favour of the business communities like above shall be delivered in near future by them.

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GST Update No 222 on movement of goods between two units under same registration

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