Valuation in case of branch transfer from a Tax Holiday plant

[sunilkumar bhageria]

We have a manufacturing unit at Haridwar which is under tax holiday exemption under income tax (hence domestic transfer pricing rules also applicable). We are transferring finished goods from the plant to depot(branches)in other state from where they are sold to independent customer. We are making invoice for said branch transfer on cost+5 % markup(reqd under transfer pricing) and paying IGST on the said amount. The branches are fully entitled to take input credit.My query is -

IN some cases the price so arrived (cost+5%) at is more than the resale price on which the material is sold by recipient branch to customer and in some cases the price so arrived is less than the price on which it is resold from branch. Is this valuation method OK from GST point of view .If not than what should be the correct method.

Request experts to provide their valuable opinion on the same.

AI Summary

Manufacturing Unit's GST Valuation Compliant with Rule 28 of CGST Rules, 2017; Full Input Credit Available A manufacturing unit in Haridwar, benefiting from a tax holiday, transfers finished goods to branches in other states, invoicing at cost plus a 5% markup and paying IGST on this amount. The branches can fully claim input credit. The query raised concerns about whether this valuation method is compliant with GST, given that the transfer price sometimes exceeds or falls short of the resale price. The response clarified that as per the proviso to Rule 28 of the CGST Rules, 2017, if the recipient can fully claim input tax credit, the declared invoice value is deemed the open market value, confirming compliance.