GST CROSS CHARGE/INPUT TRANSFER QUERY

[Sarath S]

A company engaged in IT/software export services has its Head Office (HO) in Hyderabad and a Branch Office (BO) in Bangalore. Over the years, the BO has accumulated unutilized ITC of ₹50 lakhs (FY 2018-19 to FY 2024-25) due to a lack of taxable outward supplies. However HO is engaged in zero-rated exports and claiming ITC refunds.

Considering the GST framework:

1. Can the BO transfer its accumulated ITC to the HO through cross charge? If so, how can it be structured legally?
2. Given the amendments effective from 01.04.2025 mandating ITC distribution only through the ISD mechanism, will the BO lose the accumulated ITC post-31.03.2025?
3. What is the best strategy to ensure that the company does not forfeit the accumulated ITC while remaining GST-compliant?

AI Summary

Input tax credit transfer via cross-charge enables branch ITC use, but post-amendment ISD distribution may be required.
The BO can transfer accumulated ITC to the HO by valuing internal services and issuing cross-charge GST invoices, enabling the HO to avail ITC and claim refunds on exports. Amendments require ITC distribution through the ISD mechanism after the effective date, so entities must either effect compliant cross-charges before that date or register as an ISD and distribute ITC per Rule 39. Preserve credits through proper valuation, invoicing, documentation, and timely professional advice to ensure GST compliance and avoid forfeiture.