West Bengal Authority Affirms GST Valuation Method for Inter-Branch Supplies Under Rule 28 Second Proviso

WB AAR ruled on GST valuation for inter-branch supplies. The ruling clarified that goods supplied to branches in different states can be valued under the Second Proviso to Rule 28, allowing valuation based on invoice value when the recipient is eligible for full input tax credit. The decision provides flexibility in determining the open market value for branch transfers under CGST Rules, 2017.

---

---

Issues:
1. Valuation of goods supplied to branches in states other than West Bengal under CGST Rules, 2017.
2. Interpretation of the Second Proviso to Rule 28 regarding input tax credit eligibility.

Issue 1: Valuation of Goods Supplied to Branches:
The Applicant sought an advance ruling on whether goods supplied to branches in states other than West Bengal could be valued based on the Cost Price under the Second Proviso to Rule 28 of CGST Rules, 2017, instead of 90% of MRP as required by the First Proviso. The ruling was sought under Section 97(2)(c) of the GST Act, and the application was admitted as the question was not previously decided or pending. The Applicant clarified that separate registrations were obtained for business establishments in different states, making supplies to branches qualify as supplies between distinct persons, thus subject to Rule 28 for valuation.

Issue 2: Interpretation of Second Proviso to Rule 28:
The Applicant questioned whether the value of goods supplied to branches in states other than West Bengal could be determined under the Second Proviso to Rule 28 instead of the First Proviso, which values goods at 90% of MRP. The Second Proviso states that if the recipient is eligible for full input tax credit, the value declared in the invoice is deemed the open market value. This provision applies to goods supplied for further retail sale or for use in the business, including non-trading stock like stationery and office equipment. The ruling clarified that the Second Proviso applies to goods supplied for further retail sale to non-related customers and for goods used in the course of business, and the recipient can avail full input tax credit based on valid invoices or documents under Section 16(2)(a) of the GST Act.

In conclusion, the ruling stated that the Applicant has the option to value goods supplied to branches by applying the terms of the Second Proviso to Rule 28 of the CGST Rules, 2017. The expression "where the recipient is eligible for full input tax credit" means the recipient can claim full input tax credit based on the tax paid by the supplier as mentioned in valid invoices or documents under Section 16(2)(a) of the GST Act. This ruling is valid unless declared void under the relevant provisions of the GST Acts.

---