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2019 (8) TMI 368 - AAR - GSTValuation - transfer to branches located outside the State - distinct person or not - applicant is of the view that the second provision is applicable to their case, i.e., where the recipient is eligible for full input tax credit, the value declared in the invoice shall deemed to be the open market value of the goods or services - HELD THAT:- In the case at hand, the applicant has branches outside the state of Tamil Nadu, hence, both are said to be related as per the explanation to Section 15. The supply is also to distinct person and therefore the value to be adopted is governed by rules prescribed as per Section 15(4) of CGST Act. As per Rule 28(a), it is clear that for supply between distinct persons, the value shall be the ‘open market value’ of such supply. As per Explanation (a)to Chapter IV of CGST Rules, 2017, Determination of value of supply, ‘Open Market Value’ of a supply of goods means the full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction, where the supplier and the recipient of the supply are not related and the price is the sole consideration, to obtain such supply at the same time when the supply being valued is made - In the instant case the applicant supplies the same goods i.e. Lenses, Frames, Sun Glasses, Contact Lenses as well as Reading Glasses, Complete spectacles to both recipients in Tamil Nadu and its branches outside Tamil Nadu. In the case at hand, the applicant states that their recipients in other states further supply such goods to their customers without any further value addition, repackaging, labeling etc. i.e. they are supplied as such. In such a scenario, Rule 28 gives an option to the supplier, i.e. the applicant, to adopt an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person as the value at which the supplier .i.e. the applicant supplies to his distinct/ related branch in another state - In the instant case, the applicant has the option to adopt a value which is 90% of supplies made by the branch outside Tamil Nadu to an unrelated customer which are made under similar circumstances in respect of the characteristics, quality, quantity, functional components, materials, and the reputation of the goods supplied to the branch recipient by the applicant. If the applicant does not use this option for supplies to the recipient who further supplies to their customers as such, he has to supply at ‘open market value’ which is available as per Rule 28(a). The applicant shall adopt the “open market value as per Rule 28(a) as the same is available for the supplies made to the distinct recipient outside the state. Instead of the available open market value, the applicant can also opt to value the same at 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person. If the recipient is eligible for full input tax credit, such a value shall be deemed to be the open market value.
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