GST India Forum – Goods and Services Tax (GST) in India Forums Article APPLICABILITY OF GST ON STOCK TRANSFER (INTER AND INTRA STATE)

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  • Akshay KothariAkshay Kothari
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    #802 |


    Under existing VAT/CST Laws, practically every company that makes inter-state stock transfers, does so under Form F and thus, no tax liability arises. In case of intra-state stock transfer, as such no VAT liability arises.

    However, assessee is required to reverse input tax credit on purchases if such goods are stock transferred.

    Under Goods and Services Tax (GST) Regime
    Section 10 of Model GST Law ensures that one company having establishments in different states are separate persons. Further Section 3 of Model GST Law read in conjunction with Schedule 1 outlines that supply of goods or services between distinct persons as specified in section 10, when made in the course or furtherance of business without consideration will be treated as supply.

    Stock Transfer (Inter-State)
    What transpires out from aforementioned provisions is that if goods are transferred from one establishment to another (of same entity) in different state shall be treated as an inter-state supply and hence liable to IGST.

    Establishment making the supply shall charge and deposit IGST. Establishment receiving the goods can claim input tax credit of IGST paid.

    Stock Transfer (Intra-State)
    Two establishments of same entity within same state would get covered under single GSTIN (GST registration number). Thus, any stock transfer between them would not amount to supply and thus, no tax would be levied.

    In an event wherein a company has two business verticals in same state and decides to have two different registrations in that state (Model GST Law gives that option), any stock transfer between these establishments of these two verticals would be liable to CGST + SGST.

    It is so because Section 10 also provides that a person who has obtained more than one registration in a State, shall, in respect of each such registration, be treated as distinct persons. This would be classic casse where an entity is having separate business vertical wise registrations

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