TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 697
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....mplex, Sipcot, Ranipet- 632 403 (hereinafter called the Applicant) are registered under GST with GSTIN 33AAACT2015M1ZM. They are engaged in the business of manufacture and trading of chemicals. The applicant has preferred an application seeking advance ruling on the following questions: 1. The value to be adopted in respect of transfer to branches located outside the state. 2. whether the value of such supplies can be determined in terms of the second provision to rule 28 in respect of supplies made to distinct units in accordance with clause (4) & (5) of section 25 of the CGST rules, 2017? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a 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. 2.1 The applicant has stated that they are engaged in the business of manufacture and trading of Chemicals. They are the largest producers in the world for Phthalic Anhydride, Malic Acid and Fumaric Acid. Apart from this, they have revenues from Sales of power from wind operated generators & income from letting out of storage facility. Apart from the uni....
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.... at Maharashtra (Mumbai) and input tax credit accumulated at the Maharashtra office remain unutilized due to the fact that apart from the input tax credit availed based on stock transfer, there is accumulation of input tax credit due to receipts of inputs such as bank charges, RCM charges, consultancy charges etc., at the office. Apart from this, there are input tax credit available due to payment of warehouse charges. The applicant has submitted a sampling data displaying the input tax credit availed by way of stock transfer and other purchases & expenses, wherein the percentage of excess input tax credit on stock transfer receipt to outward liability on sales at the depots as well the overall excess input tax credit available after adjusting the outward liability expressed in terms of both figures and percentage. They have stated that from the data it could be observed that the Stock transfer input tax credit availed during 2018-19 was in excess by 1.07% 86 0.19% as compared to the outward liability discharged in Maharashtra & Gujarat, respectively and also there are accumulated input tax credit availed from other purchases and expenses at the respective places of business in Mah....
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....rpreted with reference to specific invoices. Hence all Invoices or documents of like nature under Section 16 of GST Act, of goods for further retail sale or for use in the business transferred to branches considered as distinct persons being located in States other than TamilNadu, are valid documents eligible for Input Tax Credit. If the second proviso is applied it is sufficient that they pay tax at the time of supply of goods from the state of Tamil Nadu on the value declared in the tax invoice while dispatching the supplies to other States. The goods received by the recipient are further sold or supplied to the consumers/customers based on the market price. At that time, the Applicant's distinct unit outside the Tamil Nadu State pays the applicable tax under GST provisions on the basis of the actual sales value to the customers at which these are supplied to them. The Applicant has further stated that if the transfer of goods from the State of Tamil Nadu is also to take place on the basis of market value, then though the unit outside the State will be eligible to claim input tax credit on such stock transfer receipts, the amount of input tax credit of stock transfers availed....
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....pplicant is of the opinion that they may adopt the value for supply to distinct person as provided under proviso 2 to Rule 28 of the CGST/TNGST Rules, 2017. Further, there is no specific regulation in the said Rules, that the Rules are to be applied seriatim. In case of full Input tax being available to the recipient as credit, the invoice value is declared as 'Open market value. 2.4 The Applicant has submitted that, they will be entitled to adopt any value range for supply of these items to their branches when their branches are entitled to take full credit of the tax paid and such values, therefore, adopted by the Applicant are to be treated as open market value for the purpose of CGST Act and Rules. Also they have stated that that they propose to adopt a lesser price or Zero price as it may warrant for their stock transfer to their distinct units (depots) situated in different states to offset the accumulated input tax credit, which will pave way to avoid unnecessary blocking of capital/funds to the organization which in turn will ensure the smooth functioning of the business. Further due to the fact that lesser price being adopted in stock transfer would result in lesser a....
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....nging from December 2019 to February 2020 pertaining to stock transfer from Ranipet to Gujarat Distinct person; Sales by the Gujarat Distinct person; stock transfer from Ranipet to Maharashtra Distinct person; Sales by Maharashtra distinct person * Comparative Chart of Average price between Stock Transfer price & Sale Price based on the above sample data - (In percent) Unit Average Stock transfer Price Average Sale price at Depot % of Increase/(Decrease) of Stock transfer price to Sale price Gujarat 64,076.00 64,624.00 (0.8%) Maharashtra 64,622.00 64,480.00 0.2% * With regard to the current method of valuation adopted for stock transfers made, the applicant stated that they adopt the "Open market Value" as provided under Rule 28(a) of the CGST Rules, 2017. A certificate to this has been furnished by them. The said rate adopted is based on the immediately preceding approximate value of the sales done at the depots. * They have reiterated that there is no restriction that the Rule 28 and its proviso should be sequentially applied. If the recipient is eligible for full input tax credit, the invoice value will be deemed to be the open market value as provided under Pr....
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....ample Invoices. The applicant vide their submissions dated 27.08.2020, had furnished the current method adopted by them for the stock transfers and sample invoices in respect of the product Phthalic anhydride. They did not furnish the details of the finished products, list of recipients, etc.. The applicant was addressed vide e-mail dated 06.11.2020 seeking the proposed marketing pattern, Sample purchase orders for sale to the ultimate consumer with trail of stock transfer; the class of recipient of the stock transferred goods and they were also asked to confirm whether `Phthalic Anhydride is dealt with. The applicant was asked to intimate whether they wished to be heard again virtually. 4.2 The applicant vide e-mail dated 17.11.2020 furnished an interim reply, wherein they stated that * On the marketing pattern, generally there are three type of supplies * Direct supplies to the consumers from the factory (now at Ranipet, Tamilnadu) * Supplies from Depot/Agents situated in few states (generally customers who lift smaller quantities take it from depot/Agents) * Exports * The above pattern is likely to exist in the future also excepting for the fact that there would be an....
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....e to be verified to ensure the correctness of their claim. The authority has stated that there is no show cause notice or issue pending adjudication on the issue raised by the applicant in their application. 6. We have carefully examined the statement of facts, supporting documents filed by the Applicant along with application, oral submissions made at the time of Virtual hearing, written submissions made thereafter and the comments of the Jurisdictional Authorities. The applicant has sought ruling on the following questions: 1. The value to be adopted in respect of transfer to branches located outside the state. 2. Whether the value of such supplies can be determined in terms of the second provision to rule 28 in respect of supplies made to distinct units in accordance with clause (4) & (5) of section 25 of the CGST rules, 2017? The ruling sought for is on the value to be adopted for supply to the 'Distinct persons'. As per Section 97 (2), the question raised is within the ambit of this authority and the application is accordingly admitted. 7.1 The facts of the case is that the applicant is engaged in the business of manufacture and trading of Chemicals. Apart from....
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....its owing to various reasons and therefore they propose to change their valuation being adopted presently, which is the 'Open Market Value' as per Rule 28(a) of the CGST Rules 2017 to that provided under the second proviso to Rule 28 of the CGST Rules 2017. The question before us is to decide whether the method of valuation prescribed under the Second proviso is applicable to the supply to distinct persons of the applicant. We do not comment/give any opinion on the submissions of the applicant on the available excess ITC at their distinct units for want of jurisdiction and also considering that the issue raised before us is only on the value to be adopted for the supply which do not have any relation to the credit accumulation at the recipient end but for the fact that the recipient is eligible to avail the entire credit of tax paid by the applicant. 8.1 With the above facts, the relevant statutory provisions are examined. The Value of supply of goods and services are defined under Section 15 of CGST Act, 2017, which is as below: 15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the ....
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....f such supply; (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality; (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order: Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person: Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. Explanation.-For the purposes of the provisions of this Chapter, the expressions- (a) "open market value" of a supply of goods or services or both means the full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction, where the supplier and the recipient of the supply are not related and the price is the sole consideration, to ob....