Stock transfer

[Phoenix Legal]

I have 4 factories situated in different states i.e. UP, Bihar, Telengana, and Rajasthan and is in manufacturing of exempted goods. I have a central warehouse situated in UP. The raw materials I prorcure for manufacturing of exempted goods are taxable. Usually, I directly supply the goods to the customers from my factories. At times, due to demand from one specific region, I shift the goods from factories to the central warehouse.

What will the implications on the ITC under gst law? Can I save the ITC on the stock transfer to central warehouse

[Rajagopalan Ranganathan]

Sir,

ITC is available only in respect of the supply of taxable goods/services or both. Since in your case the goods supplied by you is exempted no ITC of tax paid on inputs and input services utilized by you for the supply of exempted goods is available to you.

[Amit Agrawal]

Dear Querist,

Can you pleas elaborate what is in your mind when you are talking about saving ITC etc. in given circumstances and reasons for your doubts / optimism?

[Shilpi Jain]

Why are you at all registered under GST? All FG that you manufacture are also exempt so their stock transfer is also exempt

[Shilpi Jain]

However, if you are transferring RM from one location to another then tax would be liable and registration would be required.

To the extent of this stock transfer you can take credit. This can be ensured is tracked at invoice level.
So ideally in this case also you should not have any additional tax cost.

[Alkesh Jani]

Shri

In case of M/s. SAME DEUTZ-FAHR INDIA (P) LTD, Vs. State of Telangana - 2020 (9) TMI 1057 - TELANGANA HIGH COURT, WP No. 13392 of 2020, Judgment dated 23-09-2020 High Court of Telangana held as under

"there was no occasion for the 3rd respondent to collect tax and penalty from the petitioner on the pretext that there is illegality in the transport of goods as it merely amounts to Stock Transfer and there is no element of sale of goods or services in it. Accordingly, petition was allowed and Ordered for refund of the tax and penalty paid by the petitioner along with interest and Rs.1500/- towards cost".

Hope above may be of your help

Thanks

[Ganeshan Kalyani]

If you are stock transferring finished goods then no GST at sending factory so no ITC at receiving warehouse location. If any taxable items transferred then proportionate ITC is allowed.

[Padmanathan KV]

Ultimately you are selling exempt goods to customer. Therefore, there will not be any implication on ITC by way of stock transfer.

interstate stock transfer of finished goods being exempt goods shall not attract any tax. Inter-state stock transfer of raw materials will attract GST and ITC will be available to the unit which has purchased and sent the raw material. However, the ITC will not be available to the unit which manufactures and sells the exempt finished goods.

Hence, there will not be any ITC saving over all in my opinion.

[Amit Agrawal]

With regards to case-law of M/s. SAME DEUTZ-FAHR INDIA (P) LTD, Vs. State of Telangana - 2020 (9) TMI 1057 - TELANGANA HIGH COURT, quoted above earlier, please note the following Para from the said judgment:

"10. The 3rd respondent filed counter stating that he was not aware that the petitioner had got depots at different places in the country.

He also stated that it was not reflected in the invoice or the e.way bill. He contended that when he issued show cause notice, the petitioner did not avail of the opportunity of responding to the show cause notice, and immediately paid the entire assessment and penalty without any objection and so the Writ Petition ought not to have entertained and it is an abuse of process of Court. He alleged that unlike VAT regime Branch transfer is taxable under the GST Regime, though he did not quote any provision of law in respect of the said plea."

This is just for the information purpose.

[Amit Agrawal]

And Para 8 of the said judgment:

"8. According to the petitioner, there was only a stock transfer from it’s factory in Ranipet in the the State of Tamil Nadu to its Depot at Bongulur village, Ibrahimpatnam Mandal in the State of Telangana, that there is no element of sale of goods or services in it, and mere transfer of goods inter-State would not attract the provisions of the Act because there is no taxable event in it."

It is also worth noting that in this case, still, instead of IGST (against 'deemed supply' from Tamilnadu to Telangana registrations under GST), tax-Dept. had demanded CGST & SGST (presumably, on some fancie-ground about intra-branch transfer within same state & within single gst registration) along-with penalty. This blunder, it seems, cost the Tax-Dept. the entire case.

AI Summary

Stock transfers of exempt goods don't attract GST; proportionate ITC possible for taxable raw material transfers. A business with factories in multiple states and a central warehouse in Uttar Pradesh inquired about the implications of stock transfers on Input Tax Credit (ITC) under GST law. The company manufactures exempted goods but procures taxable raw materials. Experts clarified that ITC is not available for exempt goods, and stock transfers of finished exempt goods do not attract GST. However, transferring taxable raw materials between locations can allow for proportionate ITC. A referenced court case highlighted that stock transfers without sales do not constitute taxable events, emphasizing the importance of accurate documentation in GST compliance.