Branch Trf of Capital Goods viz a viz Rule 43, Goods and Services Tax - GST

[CAMITUL MEHTA]

Dear Experts,

Background :

Co manufactures 100% nil rated products. Therefore all the ITC on Input+Input Service+CG is reversed under rule 42 + 43.Co has multiple registrations in different State and HO in Maharashtra.

Facts:
Capital Goods were purchased in April-2018. ITC was claimed in return and blocked in Rule 43. Since ITC is blocked - Depreciation is claimed in books.
Now in April 2021 we want to trf this machinery to other state say Karnataka.

Issue:
Whether I need to again pay IGST on the Capital Goods while sending them from MH to KR?
If yes - can I re-avail the ITC already reversed ?
If No - how to proceed further with this option - Could you pl help me some supporting provisions for the same.

Posts / Replies

[Alkesh Jani]

Shri

The High Court of Kerala held as under

"that although the e-way bill showed the consignee as an unregistered person, the invoice that accompanied the transportation clearly referred to the GSTIN of the consignee and hence, the mere mention of the consignee as an unregistered person in the e-way bill cannot be of any significance. Secondly, it is stated that the mention of the tax applicable in the delivery challan was by mistake for it is evident that when the goods are stock transferred and not sold, there need not be a payment of tax at all."

WP No. 17377 of 2020 

ABCO TRADES (P) LTD. VERSUS THE ASSISTANT STATE TAX OFFICER, THE STATE TAX OFFICER, THE SUPERINTENDENT OF CENTRAL EXCISE, THE STATE OF KERALA, UNION OF INDIA, GOODS AND SERVICES TAX COUNCIL [2020 (8) TMI 630 - KERALA HIGH COURT]

[KASTURI SETHI]

Sh.Alkesh Jani Ji, I want citation of the case law posted by you. Thank you very much.

[Alkesh Jani]

Shri Kasturiji Sir,

I am sorry for giving incomplete details, however the details are as under

ABCO TRADES (P) LTD. VERSUS THE ASSISTANT STATE TAX OFFICER, THE STATE TAX OFFICER, THE SUPERINTENDENT OF CENTRAL EXCISE, THE STATE OF KERALA, UNION OF INDIA, GOODS AND SERVICES TAX COUNCIL [2020 (8) TMI 630 - KERALA HIGH COURT]

With due regards

[ABHISHEK TRIPATHI]

Dear Sir,

It’s a very interesting issue.

I have never looked stock transfer in such a manner. The term Supply includes ‘transfer’ [Refer Sec. 7(1)(a)]. The taxability of such transfer between distinct/related person without consideration is taxable under GST. Thus, you have to read S. 7(1)(a) with S. 7 (1)(c) and Entry 2 to the Schedule I. Hence, stock transfer is taxable.

Before paying IGST. You have to determine whether such transfer is supply of goods or services.

Whether the assets transferred to Karnataka will be received back in Maharashtra?

No, MH registered person cannot re-avail the ITC. It is your business assets that you're transferring, why would ITC be applicable to you.

[KASTURI SETHI]

SH. ABHISHEK TRIPATHI JI,

Sir, I agree with you in toto. Nicely explained.

[Shilpi Jain]

A very dicey situation indeed. However, since depreciation claimed no chance of availing ITC at MH. Further, why are you registered when you are providing 100% exempt supplies? If further details can be made known regarding the kind of business and the machinery transferred any suggestions for the future can be examined

[Alkesh Jani]

Shri

"ln any event, now that 3rd respondent is made aware that petitioner has the principal Office at Tamil Nadu and principal place of business at Hayatnagar and additional place of business at Bongulur Village, lbrahimpatnam Mandal, the tax and penalty collected from the petitioner cannot be allowed to be retained by respondents....."

Telangana in case of SAME DEUTZFAHR INDIA P. LTD. Vs. STATE OF TELANGANA = 2020 (9) TMI 1057 - TELANGANA HIGH COURT, wherein writ petition was allowed.

[KASTURI SETHI]

Dear Alkesh Jani Ji,

It is not SAIVE . It is SAME DEUTZFAHR INDIA P. LTD. Vs. STATE OF TELANGANA = 2020 (9) TMI 1057 - TELANGANA HIGH COURT

 

[Alkesh Jani]

Shri Kasturiji Sir,

I am heartily thankful to you for this correction.

With Due regards

[Ganeshan Kalyani]

Sir since tax component was capitalized along with asset, ITC cannot be availed. You have to pay tax on the value of capital asset transferred to another branch in other state.

[Ganeshan Kalyani]

Madam Shilpi even though the taxpayer is supplying all exempted goods the registration under GST would be required because of compulsory registration provision. The taxpayer would be availing the service falling under reverse charge list, then he will have to register and pay tax.

[CAMITUL MEHTA]

Thank you all for your valuable feedback.

Jain Madam,

Elaborating the facts
1. The entity is manufacturing item which is nil rated.

2. The nature of the item is such that its perishable so, the machinery and operational staff etc needed to manufacture the final product from the RM is to be set up on the respective state's site (i.e. customer's site). For this have entered into a contract for a period of 3-5 yrs.

3. Co also is liable to pay royalty to its holding co outside India for each unit manufactured .

4. Considering the duration - can we say that we have sufficient degree of permanence and therefore registration is required in that particular stat ? or can we say that Principal POB is HO in MH and others are on-site delivery of goods so no registration req.?

[CAMITUL MEHTA]

Dear Experts,

What I intended to say is

Machinery purchased in MH GSTIN

Basic ₹ 100000

IGST ₹ 18000

Capitalised value in books ₹ 118000/- FY 18-19

Now this machinery gets transferred in FY 20-21 for producing the nil rated product to my Kar branch. This being transfer between distinct person we raise a Tax invoice in MH and following treatment is given in GSTR

GSTR-of MH

1. Outward liab in MH ₹ 18000/-

2. ITC re-claimed ₹ 18000/-

GSTR-of KAR

1. Inward ITC claimed in ₹ 18000/-

2. Reversed under Rule 43 ₹ 18000/-

Thereby, we are not availing the ITC or using it against any other supply.

Also at entity PAN level the machinery remains on the assets side and depreciation is claimed.

Pl share your thoughts.

[Shilpi Jain]

Yes. Mr, Mehta. In case you are transfering the goods to another registration, you will have to be registered under GST. In such case you can also take credit of the ITC at the time of purchase,

However, in case you have not claimed that ITC and the time limit has expired then you may not be able to claim the ITC.

[Shilpi Jain]

What has been mentioned in figures in your last reply can be done Mr. Mehta.