GST on stock transfer of Empty Cylinders

[Kaustubh Karandikar]

XYZ (Trader in Maharashtra) is receiving filled cylinders of “Refrigerant Gas” from its own manufacturing unit at Gujarat. XYZ is re-selling these filled cylinders to the customers. The customer is sending back the empty cylinder to XYZ which in turn XYZ is sending back to their unit in Gujarat. Is XYZ liable to pay GST on the empty cylinders send back to Gujarat from their Maharashtra unit?

[KASTURI SETHI]

Two types of supplies are involved. B to B and B to C and back from C to B. Cost of transportation, loading , unloading etc. from B to B, B to C and back are already borne and GST paid. Empty cylinder is property of the consumer. Already paid by the consumer. Hence no GST is required to be paid again.

[Kaustubh Karandikar]

Respected Shri Sethi Sir,

Thanks for your kind advice. However, my view is given below:

Following are the provisions under GST law for the above transaction:

• As per Article 366(12A) of Constitution of India inserted w.e.f. 16-9-2016, Goods and Services Tax means a tax on supply of goods or services, or both, except taxes on supply of alcoholic liquor for human consumption. The word used is 'supply' and not 'sale' or 'manufacture'. 'Consideration' is not required for supply.
• Section 9(1) of CGST Act, 2017 is the charging section for CGST. The section reads as follows –

there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.

• Identical definition is given for inter – state supply under Section 5(1) of IGST Act, 2017.
• As per Section 7(1)(c) of CGST Act, 2017, ‘Supply’ includes the activities specified in Schedule I, made or agreed to be made without a consideration.
• As per Schedule – I (2) of Section 7, supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business, will be treated as supply, even if made without consideration.
• Section 25(4) of CGST Act states that, a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Therefore, establishments of same person with distinct GST Registration Numbers will be treated as 'distinct persons'.
• Thus, inter-state stock transfers or branch transfer will be subject to GST. Even intra-state stock transfer or branch transfer will be subject to GST if there are separate GST registrations.

In view of the facts explained above, XYZ needs to stock transfer the empty cylinders to their Gujarat unit under the cover of a ‘Tax Invoice’ by charging GST on value of the cylinders.

[HNA CharteredAccountants]

Though the scope of taxability has been widened under GST by including the stock transfer within the ambit of "supply", there could be a possibility of claiming the benefit of Circular No. 21/21/2017-GST, dated 22-11-2017 whereunder interstate movement of rigs, tools and spares have been considered as 'neither as supply of goods nor supply of services'. Though the cylinders have not been specifically included in the circular, the intention of circular appears not to levy tax on such temporary movements.

Regards,

Ashish -

([email protected])

[YAGAY and SUN]

Such empty cylinders would move on Delivery Challan and E Way bills shall also be accompanies. However, no GST would be payable.

[KASTURI SETHI]

Respected Sh.Karandikar Ji,. Sir, I am very eager to know your comments on the views of M/s. YAGAY AND SUNS, Sirs. His reply is ' "Gaagar Mein Sagar" . He has covered so many aspects in his brief reply. Will you please quench my thirst ?

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[Kaustubh Karandikar]

Sir,

I full appreciate the advice given by the experts. But since there is no specific exemption for empty cylinders, it will be treated as supply to distinct person and GST will be liable though that may not be the intention of the govt.

[HNA CharteredAccountants]

Circular 80/54/2018-GST dated 31-12-2018 brings out that earlier circular was for movement of goods on wheels and hence in a conservative view, what can be looked at is to charge GST, however value adopted can be as per the second proviso to Rule 28 of the CGST Rules 2018 (any value declared in the invoice, would be deemed OMV)

[YAGAY and SUN]

These empty cylinders are re-use-able packaging material which cost is generally included as per the CAS and which GST is paid. Therefore, in our view it is not payable again on empty cylinders.

[Abhishek Sethi]

Given the open language used in Schedule I, there seems to be hardly any scope of availing any concession/exemption in respect of packing material, thus in my view GST shall be applicable on transfer of such empty cylinder from Trading unit to Manufacturing unit in other state.

Re inclusion of such cost within cost of initial supply, such argument may not help as the cylinder is received back, thus only some allocation would always go in a single sale of gas, not entire cost of cylinder per gas

Re Valuation, as this packing material is used for taxable supply and full credit shall be available to recipient, book value or any nominal value may be adopted for transfer purposes

[YAGAY and SUN]

https://cbec-gst.gov.in/faq.html

82

Whether GST will be leviable in case of returnable packing material like drums supplied with finished goods?

GST will be levied on the value charged for the supply only.

[KASTURI SETHI]

Yes, Sir. It is beyond doubt. You have already cleared the air on the issue.

AI Summary

Stock transfer of empty cylinders: treated as supply between distinct registrations, attracting GST unless specific exemption applies.
Inter unit movement of empty cylinders between separately registered establishments is treated as 'supply' under Schedule I even without consideration, so such stock transfers prima facie attract GST and require invoicing; valuation can be nominal or book value where recipient can claim full input tax credit. Administrative circulars addressing temporary movements of tools and spares may be invoked but do not expressly exempt empty cylinders, so taxpayers commonly use delivery challans, e way compliance, and conservative valuation while disputing applicability where initial supply included cylinder cost.