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.

[Rachit Agarwal]

Proviso to Rule 28 of CGST Rules, 2017

Provided further that 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 the goods or services.

Considering the said provio, your valuation is in compliance to GST provisions

AI Summary

Open market value deemed when recipient claims full input tax credit, permitting invoice-based branch transfers as GST-compliant.
Where the recipient branch is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value of the goods; thus invoicing inter-branch transfers at cost plus the applicable transfer-pricing markup complies with GST valuation requirements for such transfers.