No GST Payable For Movement Of Goods Between Two Units Working Under Same GSTIN: Rajasthan AAR

The applicant is in the business of manufacturing Thermocol, PET Bottles, Tableware, Kitchenware & Tiffin, Toilet ware, Plastic Casseroles, Steel Household, Plastic Chairs, and Flasks. The applicant has been availing input tax credit on capital goods, inputs as well as input services used in or in relation to the manufacture of our final product as per the provisions of the CGST Act, 2017.

The applicant has its manufacturing unit in Jaipur. Presently, the applicant is carrying out all functions in relation to the receipt of inputs, capital goods, input services, manufacture of final goods as well as dispatch of final goods from their registered premises.

The applicant is planning to expand the operation of the company by increasing the capacity to manufacture the finished goods. Therefore, since the space in registered premises is limited, they are planning to establish a new unit within the Jaipur district (within Rajasthan). The new unit would produce similar goods to those produced in their current registered premises.The new unit would also be used to produce semi-finished goods, which would then be sent to the first unit for finishing before being sold to customers.

The applicant has sought an advance ruling on the issue of whether GST is payable on the movement of goods between different units under the same GSTN.

Yet another issue raised was in respect of the value of e-way bills for the transfer of goods from one unit to another.

The AAR observed that since it is the same GSTIN of both the units (present and new unit), there is no occurrence or constitution of "supply" in respect of the movement of raw materials, semi-finished, finished, or capital goods between these two units within the state. Therefore, no liability for GST would arise for a movement between two units working under the same GSTIN.

The AAR stated that for the transfer of the goods between two units, they would have to take the value of the goods as explained in Explanation 2 to Sub Rule (1) of Rule 138 of the CGST Rules, 2017.

Rule 138 of the Central Goods and Services Tax (CGST) Rules, 2017 relates to information to be furnished prior to the commencement of movement of goods and the generation of an e-way bill. As per Explanation 2 to Sub Rule (1) of Rule 138 of the CGST Rules, 2017, the consignment value of goods shall be the value, determined in accordance with the provisions of Section 15, declared in an invoice, a bill of supply or a delivery challenge.

The AAR observed that since the applicant would have a single GST No. for both the units, then as per section 16(1) of the CGST Act, 2017, there would be only one ledger for the ITC credit. Therefore, they could use ITC for the goods/raw material/capital goods received in one factory for payment of GST for the clearance made from the second unit or vice versa.

Applicant's Name: M/s Mody Education Foundation

Citation: Advance Ruling No. RAJ/AAR/2022-23/04

Dated: 19.05.2022

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