Methods for arriving at Value in respect of Transfer to branches located outside the state: AAR [Read Order]

The Tamil Nadu Authority of Advance Ruling (AAR) carved out the method for arriving at value in respect of transfer to branches located outside the state.

The applicant, M/s. Thirumalai Chemicals Limited is engaged in the business of manufacture and trading of Chemicals. They are the largest producers in the world for Phthalic Anhydride, Malic Acid and Fumaric Acid. Apart from this, they have revenues from Sales of power from wind operated generators & income from letting out of storage facilities. Apart from the units in Tamilnadu, they have units & branches located in Gujarat, Maharashtra and Dadra & Nagar Haveli. Apart from the domestic and export sales they are also engaged in Stock transfer of their finished products to their units (depots) located in other states, who are distinct units as per Section 25 of the Act and to their agents in other States.

The applicant has preferred an application seeking advance ruling on the questions in respect of the value to be adopted in respect of transfer to branches located outside the state and whether the value of such supplies can be determined in terms of the second provision to rule 28 in respect of supplies made to distinct units in accordance with clause (4) & (5) of section 25 of the CGST rules, 2017.

The coram consists of Kurinji Selvan and B. Senthilvelavan ruled that the applicant can adopt any one of the three methods provided under Rule 28 of the CGST/ TNGST Rules 2017 read with Section 15 of the CGST/TNGST Act 2017 to arrive at the value in respect of supply to distinct persons.

Firstly, on the basis of open Market Value as is presently being adopted by them.

Secondly, 90% of the ultimate sale value was raised by the distinct persons to the un-related ultimate customers based on the Purchase Orders in cases of ‘as such’ supplies.

Lastly, the distinct persons being eligible for full Input Tax credit of Taxes paid by the applicant, the ‘Invoice value’ is the deemed ‘Open Market Value’.

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