Transfer of machinery between deemed distinct person.

[Kanishk Manglik]

Respected faculty,

i have encountered a small issue regarding transfer of machinery between deemed distinct persons. I have a machinery in my Delhi factory and i want to sell it. I have no ITC available in my Delhi GST no while i have a sufficient ITC amount in my Noida GST no.

Query 1 : Now i was wondering if i could transfer the machinery from my Delhi unit to Noida unit at a nominal value of say 1 Lakh taking advantage of Rule 28 under GST act as both the units are under GST and invoice value can be market value. Later on i can sell it at market value say 25 L and avail the benefit of GST input available in my Noida GST no to pay the liability.

Query 2 : Will it effect depreciation and any other provision of income tax .

Hope i am able to convey the query properly.

Thank You

[Rajagopalan Ranganathan]

Sir,

You have to pay gst on the value adopted by you for transferring the machinery from the Delhi unit to the Noida unit. The gst paid by the Delhi unit can be availed as credit by the Noida unit.

When the Noida unit sells the machinery to an unrelated third party it can pay gst on transaction value using the ITC available in its electronic credit ledger.

As far as depreciation under Income Tax Act since Noida unit avails the credit of gst paid by the Delhi unit Noida unit cannot claim depreciation the tax component which is availed as credit. If you claim depreciation on the tax component you have to reverse the credit taken along with interest.

[Shilpi Jain]

As far as gst is concerned u can do what you have mentioned I.e. taking advantage if rule 28.

AI Summary

Transfer of Machinery Under GST: Rule 28 Implications for Input Tax Credit and Depreciation A participant raised a query regarding the transfer of machinery between deemed distinct persons under GST regulations. The individual plans to transfer machinery from a Delhi unit to a Noida unit at a nominal value, utilizing Rule 28 of the GST Act, and later sell it at market value to leverage input tax credit (ITC) at the Noida unit. Responses advised that GST must be paid on the transfer value, with the Noida unit eligible to claim this as credit. However, the Noida unit cannot claim depreciation on the GST component availed as credit, and if depreciation is claimed, the credit must be reversed with interest.