Under GST every registered branch is a separate person. So transfers between branches is taxable.
You have to charge tax on freight, there is no doubt in it.
Now the question is what should be the value of asset/goods transferred from one branch to another.
For this we have to refer section 15 of CGST Act, 2017.
Sub-section 1 talks about valuation where transfer is between unrelated person. But in your case the transfer is between related persons.
Definition of related person under GST
(a) persons shall be deemed to be “related persons” if––
- such persons are officers or directors of one another’s businesses;
- such persons are legally recognised partners in business;
- such persons are employer and employee;
- any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them;
- one of them directly or indirectly controls the other;
- both of them are directly or indirectly controlled by a third person;
- together they directly or indirectly control a third person; or
- they are members of the same family;
Point vi above puts both branches as related person since both branches are controlled by same person (definition also includes legal person).
So to check valuation we have to refer to valuation rules issued by government.
As per these rules:
When the goods or services are delivered or sold or supplied to related person, then value of goods shall be:
- be the open market value of such supply;
- if open market value is not available, be the value of supply of goods or services of like kind and quality;
- if value is not determinable as above, be the value as determined by application of rule 4 or rule 5, in that order:
Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services.
Again if valuation is not possible under above rule then we need to check rule 3, 4 and 5.
In your case consider the value which you will be charging to a third party even if you will be selling the product as a scrap.
If still the value is nill, then charge Nil value in invoice. But be prepared to prove the valuation.
chatCommentsMissed one point taking 110% of cost of product supplied. Will edit answer later on this point. - Pulkit Sharma