GST on Transfer from one unit to other unit in Same State

By | March 1, 2017
(Last Updated On: March 1, 2017)

Question: If XYZ Ltd is transferring goods to its another unit within the same state, will it be treated as supply of goods and whether GST will be payable on it by XYZ?

Answer:

The transaction of stock transfer is made without consideration. A transaction will be treated as supply even though it is without consideration if it is specifically mentioned under Schedule I of the Revised Model GST Law,

(Section 3 (1) (c)).

The clause 2 of Schedule I provides that the transaction between distinct persons as mentioned in section 10 would amount to supply even if there is no consideration.

In case of Intra State Supply, Section 23(2) of the Draft GST Law provides that a person can register its different business verticals separately even if they are operating in the same State.Therefore, assessee can opt for such option.

Further, Section 10(3) of the Draft GST Law provides that such separately registered units would be treated as distinct persons.

Therefore, the transaction between two separately registered business verticals in the same state would amount to supply and GST will be payable.

Conclusion

Therefore, in above case

i) The transaction is liable to GST,  if that another unit is different business verticals and same is registered under section 23(2) of the Draft GST Law.

ii) The transaction is not liable to GST  if it not separately registered or not a different business vertical .

Relevant Extract of Section 3 of Revised Model GST Law

  1. Meaning and scope of supply

(1) Supply includes—

(a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,

(b) importation of services, for a consideration whether or not in the course or furtherance of business, and

(c) a supply specified in Schedule I, made or agreed to be made without a consideration.

—–

Relevant Extract from SCHEDULE I of Revised Model GST Law

MATTERS TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT

CONSIDERATION

[IN TERMS OF CLAUSE (c) OF SUBSECTION (1) OF SECTION 3]

………………..

  1. Supply of goods or services between related persons, or between distinct persons as specified in section 10, when made in the course or furtherance of business.

…………………..

Relevant Extract of Section 10 of Revised Model GST Law

  1. Taxable person 

(1) Taxable Person means a person who is registered or liable to be registered under Schedule V of this Act.

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

(3) An establishment of a person who has obtained or is required to obtain registration in a State, and any of his other establishments in another State shall be treated as establishments of distinct persons for the purposes of this Act.

Relevant Extract of Section 23 of Revised Model GST Law

  1. Registration

(1) Every person who is liable to be registered under Schedule V of this Act shall apply for registration in every such State in which he is so liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed:

PROVIDED that a casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to the commencement of business.

(2) Notwithstanding anything contained in sub-section (1), a person having multiple business verticals in a State may obtain a separate registration for each business vertical, subject to such conditions as may be prescribed

 

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