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Taxability of inter-unit supplies

Blog Post created by www.withdia.com Your Intelligent Assistant on Jun 2, 2017

 In this blog, we look at a query on supplies between units of the same entity.

 

Query:

We have two trading units for IT goods (one in Karnataka, one in Maharashtra) and another unit for ITeS (in Karnataka). Will supplies from the trading units to the ITeS unit and vice-versa be taxable?

 

Response:

Under GST, while all units within the same State would be reckoned as one taxable person for the purposes of GST, every branch or a unit would be deemed to be a distinct person, if they are located in different States (or Union Territories). However, at the option of the taxable person, even different units within the same State can be registered as separate taxable persons, if they are different business verticals.

 

Accordingly, the IT Unit (trading) and ITeS Unit (services) in Karnataka will prima facie be one taxable person and the IT Unit (trading) in Maharashtra will be another taxable person for the purposes of GST, even though this unit is also covered within the same PAN (under Income Tax) as that of the Karnataka units.

 

Given that the Karnataka Units together and the Maharashtra Unit will be treated as separate taxable persons, any supplies between units in the two States will also qualify as ‘supply of goods or services’, as relevant, and will be liable to GST – even though such supplies may be without any consideration. However, supplies between the ITeS Unit and the IT Unit in Karnataka will not be taxable supplies.

 

Legislative reference: Schedule I of the CGST ACt, 2017 read with Section 7 & 8 of the IGST Act, 2017

Authors: Meghana Belawadi and NR Badrinath

 

 

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