Updated: Dec 21, 2019
-Vamsi Krishnan P
Stock transfer or Branch transfer refers to transfer of goods from one unit of a business entity to another unit of the same entity.
As per section 25(4) of CGST Act, persons with different GSTIN’s but having same PAN, situated in the same state or in a different state, are Distinct Persons.
Will a stock transfer between distinct persons, where there is no consideration involved be covered by definition of Supply?
Section 7(1)(c) states that the activities specified in Schedule I, i.e., supply of goods or services or both between related persons or between distinct persons made or agreed to be made without a consideration, in the course or furtherance of business constitutes a Supply.
Accordingly following stock transfers, even if no consideration is involved, will be taxable:
1) Intrastate stock transfer made to a distinct person or related person.
2) Interstate stock transfer made to an entity in another state having the same PAN.
But if no consideration is involved, which amount is to be taken as the taxable value?
Rule 28 of Chapter IV says that value of such supplies shall be:
(a) 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.
The following discussion is intended to throw some lights onto whether a Tax Invoice is required to be issued or not in case of a stock transfer.
Section 31(1) requires a registered person supplying taxable goods to issue a tax invoice and shall contain all the particulars mentioned in Rule 46. Further, Rule 55 specifies supplies involving transportation of goods, which requires no Invoice but only a Delivery Challan. A delivery Challan in lieu of Invoice can be issued for the purposes of transportation of goods for job work or transportation of goods for reasons other than by way of supply. Therefore in case of a taxable stock transfer, issuance of Delivery Challan will not suffice and requires a Tax Invoice.
A registered person, in order to be entitled to ITC in respect of any goods or services or both received by him shall be in possession of an Invoice or a Debit note as per Section 16(2)(a). Hence in order to enable the recipient to take ITC, it is necessary that the supplier issues a Tax Invoice.
E-way bill is required for transportation of all goods, whether it is a supply or not, if not otherwise exempted.
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