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Value of goods in case of inter-state supply by H.O. to branch office shall be ‘open market value’ under GST

August 5, 2019[2019] 108 taxmann.com 80 (AAR - TAMILNADU)
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GST : Value in respect of supply of goods i.e., lenses, frames, sun glasses, contact lenses as well as reading glasses, complete spectacles by applicant to distinct persons being branches outside state for further supply as such by recipient would be open market value of such supplies that was available as per rule 28(a) and explanation (a) to chapter IV of CGST/TNGST Rules 2017 read with section 15 of the CGST/TNGST Act, 2017 and applicant had option to adopt an amount equivalent to ninety per cent of price charged for supply of goods of like kind and quality by recipient to his customer not being a related person

• The applicant was trading spectacle frames, lens, sunglasses and accessories which were procured locally or imported. It had its office in Tamil Nadu. The goods transferred as such to its branches in other states outside who further sold to their customers. The applicant stated that it was eligible under second proviso to rule 28 of Valuation Rules/CGST Rules under which it could declare any value in the invoice of transfer to other related party. It also stated that it was covered under CGST rule 28(a) as the open market value was shown, but it wanted to use proviso 2 and not proviso 1. It stated that both proviso should not be read together and were independent.

• The question 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.

• Under GST, branches which are situated outside the state are treated as distinct person. In the above case the supply between the applicant and the branches is considered as a supply between distinct persons, the fact of which is not disputed by the applicant also. The value to be adopted is governed by rules prescribed as per section 15(4).

• The value in respect of supply of goods i.e. lenses, frames, sun glasses, contact lenses as well as reading glasses, complete spectacles by the applicant to distinct persons being branches outside the state of Tamil Nadu shall be the open market value of such supplies that is available as per of rule 28(a) and Explanation (a) to chapter IV of CGST/TNGST Rules 2017 read with section 15 of the CGST/TNGST Act 2017. Where the goods are intended for further supply as such by the recipient and the applicant has the option to adopt an amount equivalent to ninety per cent of the price charged for the supply of goods of like kind and quality by the recipient to his customer being a related person as the value of such supplies to the distinct recipient as per proviso to rule 28) and explanation (a) and (b) to chapter IV of CGST/TNGST rules 2017 read with section 15 of the CGST/TNGST Act 2017.

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