During the pre-GST era, for inter-State stock transfers the major concern of the Industry was with

regard to
additional cost of CST and the compliance burden of submission of statutory forms. However, there was no concept
of deemed service between branches located in two different States and hence there was no requirement to pay
Service Tax on such activities. With the introduction of GST, by virtue of Schedule I, the scope of levy has been
enhanced to cover even deemed service transaction. This means that if one branch transfers goods or renders
services to Company’s another branch; GST shall be applicable on such transfers.

Invoicing of Inter Branch Transfer

Since all inter branch transfers are treated as normal supply under GST provisions, such transfers from one branch to
another located in different States/UT shall be affected under a tax invoice. However, the inter branch transfers
within the same State/UT shall be effected under a delivery challan. Since all inter-branch transfers having different
GSTIN ( though under same company/entity) are treated as normal supply under GST provisions, such transfers
from one branch to another located in the same States or different States/UT shall be effected under a tax invoice.

Valuation is computed on the basis of Open Market Value, Value of supply of similar goods and services of similar
quality, 90% of the price charged for the supply of similar goods and services of similar quality

The basic objective of the valuation rules in such cases appears to address the concerns of over/under invoicing, in
order to avoid tax loss to the Revenue. For instance, an input is transferred by Branch A in Chennai to Branch B in
Delhi for further manufacture, wherein the input is taxable, and the final product is exempted. In such a scenario, the
issuing branch could try to possibly reduce the price to minimise the impact of tax cost at the receiving branch. In
order to avoid such tax planning, the valuation for such transactions are governed under specific rules under the
CGST Rules, 2017.

Inter-unit Supplies in GST & Section 25 (4) of the CGST Act, 2017

Every branch or depot with individual GSTINs belonging to one company will be treated as an individual
entity. Meaning and Scope of Supply

The meaning of supply under the GST Act is very wide. It includes all forms of supply of goods or services or both
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.

It implies that all the branches of a Company situated in different States/Union territories and from where
the Company is making taxable supplies shall be liable to be pay GST.
Rule 28 of CGST Rules, 2017 defines as per Rule 28 considering the following factors:

The value of supply of the goods or services between the branches of the same business.

Open market value of such supplies

If the open market value is not available, the value of supplies of a similar kind will be considered.

Invoicing provisions for inter-branch supplies

E-bill on such transactions in case of interstate transactions, E-way Bill should be generated if the
consignment value of the goods exceeds Rs. 50,000.

Delivery challan

1. The branches of the company have to be registered if taxable supplies of goods and services
exceed the turnover of 20 lakhs in a financial year.
2. If the state has more than one branch/warehouse location, then one location shall be shown as
principal place of business and the other place as additional place of business
3. If a company has branches in different states then they are treated as different entities and
hence the branch will be liable to pay GST
4. But if the supply takes place within same state, the organization won’t be liable to pay GST.