TaxTMI 
TaxTMI 
2019 (8) TMI 368
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....t, T.Nagar, Chennai-600017 (hereinafter called the Applicant or the Company) is registered under the applicable provisions of the CGST 2017 and TNGST 2017 vide registration number 33AAPCS6371Q1ZH. They have preferred an application seeking Advance Ruling on "The value to be adopted in respect of transfer to branches located outside the State." The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted the copy of Challan evidencing payment of application fees of Rs. 5,000/-each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2. The Applicant has stated that they import as well as locally procure Lenses, Frames, Sun Glasses, Contact Lenses as well as Reading Glasses, Complete spectacles and are engaged in re-selling them. They have their office in Tamil Nadu at Chennai. They also have branches outside the state of Tamil Nadu and the goods imported and re-sold by the applicant are also transferred to their branches located outside the State for subsequent supply to ultimate customers. In the present case as the branches are distinct persons, they are required to discharge the CGST/SGST/IGST as applicable while sup....
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....engal AAR and the Appellate Authority for Advance Ruling West Bengal in a similar issue in respect of M/S GKB Lens Private Limited. 4. We have gone through the submissions made by the Applicant. The question before us relates to determination of value to be adopted in respect of transfer to branches located outside the State, i.e., to distinct persons of the same PAN. The applicant claims that applying the second proviso to Rule 28 of GST Rules on such supplies, it is sufficient that they pay the tax at the time of supply of goods from the State of Tamil Nadu on the value arrived by taking into account the cost price in the tax invoice while dispatching the supplies to other States. The claim as we observe is that the value need not be as per first proviso to Rule 28, even though such price be available. 4.1 From the submissions, before us, we find that the applicant imports as well as locally procure Lenses, Frames, Glasses, Contact Lenses, etc and is engaged in re-selling them. The applicant has branches outside Tamil Nadu where, the applicant transfers these goods for further selling from these branches. These branches are distinct persons as per GST Law. Section ....
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....rectly owns controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; (b) the term "person" also includes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. In the case at hand, the applicant has branches outside the state of Tamil Nadu, hence, both are said to be related as per the explanation to Section 15. The supply is also to distinct person and therefore the value to be adopted is governed by rules prescribed as per Section 15(4) of CGST Act. The same is provided under Rule 28 of CGST Rules, 2017, which is as under: Rule 28. Value of supply of goods or services or both between distinct or related persons, other than through an agent.-The value of the supply of goo....
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....transaction, where the supplier and the recipient of the supply are not related and the price is the sole consideration, to obtain such supply at the same time when the supply being valued is made. In the instant case the applicant supplies the same goods i.e. Lenses, Frames, Sun Glasses, Contact Lenses as well as Reading Glasses, Complete spectacles to both recipients in Tamil Nadu and its branches outside Tamil Nadu. As per the applicant, there are supplies being made to such unrelated recipients within Tamil Nadu who are being supplied at the same time of such supply for which price is the sole consideration. Thus, there exists an 'open market value' for such supplies being made to distinct recipients who are branches of the applicant in different states/ Union territories. Thus, there is no necessity to go further down to Rule 28(b) or (c) as they are to be read sequentially and are also applicable only when 'open market value' is not available. Once Rule 28(a) is applicable, Rule 28(b) or (c) cannot be used by the applicant for determining the value of the supply of goods between distinct persons. 4.4 In the case at hand, the applicant states that their recipients in other ....
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....ient as the recipient is eligible for full input tax credit as per the further proviso to Rule 28. If that were the case, the applicant may use a value much higher than the open market value to pass on input tax credit to his branch office outside the state or he may use a much lower value than even his cost price, which will lead to accumulation of input tax credit for the applicant, which is not the intention of a taxation based on value addition. Further, if a taxpayer can skip all the provisions under Rule 28(a) to (c), in spite of them being specifically mentioned as the value which "shall" be adopted, then in no scenario will any taxpayer ever use Rule 28(a) to (c). Both provisos are to be read together and not independently, i.e. the applicant cannot choose whichever proviso is favourable to them. Therefore, the applicant shall adopt the "open market value as per Rule 28(a) as the same is available for the supplies made to the distinct recipient outside the state. Instead of the available open market value, the applicant can also opt to value the same at 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a ....