TaxTMI 
TaxTMI 
2021 (1) TMI 697
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....ness at No.25A, Sipcot Industrial Complex, 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 fr....
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....as also submitted that they have their Registered office 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 ....
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....ature [Section 16 (2) (a)], the above proviso must be interpreted 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,....
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....ed for cases of 'as such supply'. Therefore, the Applicant 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 pr....
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....020 submitted the following: • A random selection of Sample invoices(copies) for a period of three months ranging 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....
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....to furnish the details of the finished products stock transferred from Ranipet with Invoices; Current method of Valuation adopted with relevant documentation; the list of recipients of these products from Maharashtra and Gujarat with Sample 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,....
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.... has paid tax on the open market value and the other state unit has taken full input tax credit. If there is excess ITC cover and above the input tax credit every year (treating the closing stock as NIL) then the sale value at other end will be lesser than the stock transfer receipt at other end. The reasons for lesser sale value at the other end then the receipt value have 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....
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....buyer quoting the value mentioned in the purchase order raised on them by such buyer along with the relevant taxes(IGST/CGST&SGST). 7.3 The clarification sought before us is whether the value to be adopted for supply to distinct persons can be determined in terms of the Second proviso to Rule 28 of the CGST Rules 2017. The applicant has stated that the distinct units have excess accumulated credits 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 recipie....
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....CGST Rules, 2017 provides the value to be adopted when the supply is between distinct persons and the same 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 goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall- (a) be the open market value of 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 el....
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....plying to distinct or related person and do not mandate that the value of supply should be goods of the ultimate sale value, even in such a scenario. Proviso 2 states that when the tax paid is available as full input tax credit, then the invoice value is the 'Open Market Value'. Considering the constructions of the rule as above, we find that the law provides the taxpayer an option to adopt 90% of the price charged as value to be adopted initially (i.e., supply between distinct persons) and in the alternative, in case of full Input tax being available to the recipient as credit, the invoice value is declared as 'Open market value'. There is nothing to show that the second proviso is subordinate to the first. It independently deals with a scenario where the recipient is eligible for full input tax credit. From the above, it is evident that the Value in respect of supply between distinct persons can be 1. The available Open Market Value; 2. In cases of 'as such' supply by the recipient, the supplier has an option to value the supply at 90% of the ultimate sale value; 3. When the recipient is eligible for full Input Tax credit, the....