R & D unit and ITC

[Kaustubh Karandikar]

XYZ(Mumbai) is paying GST on outward supply of goods from Mumbai to various customers. They are carrying out R & D activity from Pune for a new product which is altogether different from what is made at Mumbai unit and the said place is declared as ‘Additional Place of Business’. XYZ is claiming ITC on goods and services received at Pune. Pune being R & D unit, no outward supply and therefore no GST is paid for activities at Pune unit.

1) Can XYZ claim ITC on goods and services received at Pune unit?

2) Can XYZ stock transfer goods required for Pune unit from Mumbai unit without payment of GST under a delivery challan?

[KASTURI SETHI]

Dear Sir,

Answer to query no.1 is YES. R & D is in the course of business as well as furtherance of business. No correlation is required between input and output as it was in Central Excise era.

Answer to query no.2. is NO. Stock transfer is only on payment of tax.

[KASTURI SETHI]

W.r.t. my reply dated 27.10.21, I rectify my reply. stock transfer can be done under delivery challan as the concept of 'business vertical' stands omitted..

[Shilpi Jain]

Agree with Kasturi sir. Credit of R and D would be eligible and no requirement that the credit of one unit to be used only for the outward supply of that unit. Once credit is availed it becomes a common pool. also stock transfer of goods within the same registration. no liability of GST

[Kaustubh Karandikar]

Thanks everyone for your kind advice. However, there is a little twist in the facts. The R & D unit at Pune is given different name and is called a 'Division of XYZ' but having the same PAN under Income Tax. Will the eligibility of ITC affect this? In my view no, since the PAN number is same. Your views please.

[KASTURI SETHI]

Sh.Kaustubh Karandikar Ji,

Sir, Your view is correct. I concur with your view in toto.

[Shilpi Jain]

Yes. Merely being ca.led by a different name will not have any bearing on the conclusion.

AI Summary

Input tax credit eligibility affirmed for R&D units; stock transfers within same registration allowed under delivery challan. ITC for goods and services received at an R&D unit declared as an additional place of business is eligible as R&D is in the course or furtherance of business; credits become a common pool. Stock transfers to the R&D unit within the same registration can be made under a delivery challan without GST where the business vertical concept is omitted. A different name for the R&D unit does not affect ITC eligibility when the same PAN and registration apply.