Taxability of Inter State stock Transfer under GST

[Balasubramanian Natarajan]

Presently interstate Stock transfers are not taxable under CST on submission of duly completed Form F.

CBEC in their FAQ has clarified as under:

Q 7. Are self-supplies taxable under GST?

Ans. Inter-state self-supplies such as stock transfers will be taxable as a taxable person has to take state wise registration in terms of Schedule 1(5).  Such transactions have been made taxable even if there is no consideration.  However, intra-state self-supplies are not taxable.

Q 6.  Whether supplies made without consideration will also come within the purview of Supply under GST?

 Ans. Yes only those cases which are specified under Schedule I to the Model GST Law. 

Analysis:

Model IGST Act defines supply as:

(f) “supply” has the same meaning as assigned to it in section 3 of the CGST Act, 2016

3. Meaning and scope of supply (1) Supply includes  (a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,

 (b) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and

(c) a supply specified in Schedule I, made or agreed to be made without a consideration.  (2) Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.

SCHEDULE I

MATTERS TO BE TREATED AS SUPPLY WITHOUT CONSIDERATION

1. Permanent transfer/disposal of business assets.

2. Temporary application of business assets to a private or non-business use.

3. Services put to a private or non-business use.

4. Assets retained after deregistration.

5. Supply of goods and / or services by a taxable person to another taxable or nontaxable person in the course or furtherance of business.

Provided that the supply of goods by a registered taxable person to a job-worker in terms of section 43A shall not be treated as supply of goods

Second proviso to Section 9(1) of Model CGST/SGST Law is as under

Provided further that a person who is required to be registered under paragraph 1 of Schedule III of this Act shall not be considered as a taxable person until his aggregate turnover in a financial year exceeds [Rs ten lakh]

Aggregate Turnover is defined as-

Section 2(6)- “aggregate turnover” means the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be; Explanation.- Aggregate turnover does not include the value of supplies on which tax is levied on reverse charge basis and the value of inward supplies

Thus it can be seen that the turnover of a taxable person having the same PAN number is clubbed together all purposes such as:

• For Registration – For  determining threshold limit
• For Composition Scheme

Supply has been defined to cover in its scope only when it is for consideration with the exceptions provided therein,

One such exemption so as to treat them as supply even when there is no consideration is supplies specified in Schedule I

It s interesting to note that sl no 5 of the said schedule I covers “Supply of goods and / or services by a taxable person to another taxable or nontaxable person in the course or furtherance of business.

It comes in to play only when the supply is by one Taxable person to another taxable or non taxable person.

This makes it abundantly clear that person supplying and the recipient are two different persons.

Just because, the same person has different GST registration numbers in different States, will not make a person with same PAN as different persons.

Accordingly, in my view, interstate stock transfers by a person having the same PAN will not attract GST

Balasubramanian n

02.11.2016

Discussions to this article

[Ganeshan Kalyani]

The tax on stock transfer is going affect the working capital of an organisation . say if Tamil Nadu manufactures a product and transfer it to its warehouse in Karnataka. the tamil nadu manufacturer has to pay IGST on stock transfer made. and the credit of the same is available to receiving unit. but that credit can be set off against the liability which would arise only receiving unit sell the received product . so only when there is demand the stock transfer need to be carried out.