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TMI Blog2019 (6) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of supply of goods by one distinct entity (Factory/depot) as defined under sec 25(4) of the CGST Act 2017 as amended to another distinct entity (Factory/depot) can be determined on the basis of our cost of production. Our cost of production depends mainly on cost of inputs and input services hence the same fluctuates with the price of inputs and input services". At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST 02. 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- Additional submissions- We write with reference to aforesaid subject in connection to hearing under subsection (4) of section 98 of the CGST/MGST Act 2017 regarding pronouncement of advance ruling on the questions specified in our application in GST ARA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number (PAN) under Income Tax Act but bearing distinct registration number under GST law will be considered as distinct entities under sec 25(4) of CGST Act 2017. 2.2 Inputs, capital goods and outputs are supplied by one distinct entity to another distinct entity will be valued as per CGST Rules 2017. 2.3 Rule 28 of CGST Rules 2017 governs valuation of supply of goods from one distinct entity to another distinct entity. 2.4 As per Rule 28 of CGST Rules 2017, value of supply of goods between distinct entities will be based on open market value of the said goods. 2.5 Second proviso to Rule 28 of CGST Rules 2017 provides that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services 2.6 According to Rule 30 Of CGST Rules 2017 the value Shall be one hundred and ten percentage of the cost of production or manufacture of such goods. 2.7 Rule 30 Of CGST Rules 2017 will be applicable if Rule 27, Rule 28 and Rule 29 of CGST Rules 2017 are not applicable. 2.8 Since transactions undertaken by the company under discussion are amongst the distinct entities as defined under sec 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket value. 4.9 Rule 30 of CGST Rules 2017 provides that the value shall be one hundred and ten percentage of the cost of production or manufacture of such goods and the said rule will be applicable only if Rule 27, Rule 28 and Rule 29 of CGST Rules 2017 are not applicable. 4.10 Since transactions undertaken by the company under discussion are amongst the distinct entities as defined under sec 25(4) of CGST Act 2017, valuation of the said transactions will be duly covered under Rule 28 of CGST Rules 2017. 4.11 Therefore Rule 30 of CGST Rules 2017 will not be applicable on the company and as per second proviso to Rule 28 of CGST Rules 2017, cost price which the company will declare on invoice will be considered as Open Market value for the purpose of determine taxable value of goods. In this connection your kind attention is invited to the Advance Ruling pronounced by Advance Authority of Ruling Kolkata on the same issue in the case of In re GKB Lens Pvt Ltd (AAR Kolkata) = 2018 (6) TMI 72 - AUTHORITY FOR ADVANCE RULING - WEST BENGAL (Copy enclosed) Prayer: In view of the aforesaid facts of the case, provisions of the law and Advance Ruling pronounced by the AAR Kolkata, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket value of the goods or services. Rule 28 deals with valuation of supply when it is made between distinct or related persons. If a person obtains or is required to obtain more than one registrations in more than one state then in accordance to the provisions under section 25 of CGST Act, each registration shall be treated as "distinct persons" for the purpose of the CGST Act. The Applicant at the time of personal hearing has informed that separate registrations have been obtained for business establishments in different states. These independently registered business establishments are referred as factory or depots. Thus, supplies to these depot from manufacturing units or depot to depot, qualify as supplies made between the distinct persons and provisions of Rule 28 will be applicable for valuation of such supplies. And dealer is eligible for Input tax credit. Hence, "The applicant is eligible to value these goods by applying the terms of the Second Proviso to Rule 28 of CGST Act. 04. HEARING Preliminary Hearing in the matter was held on 27.112018. Sh. Subhasis Banerjee, FCA, and Sh. Sandesh Shinde, Executive Accounts appeared and requested for admission of application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers on time and to maintain optimum inventory at depot level situated across the country, moves goods from factory to depot and vice versa. The movement of goods among and between the factories and depots consists of paints, raw material, capital goods and other goods. All the factories and depots of the company share same PAN under Income Tax Act. However, and as undisputed by the applicant depot and factory being distinct entities under Sect.25 (4) of the CGST Act 2017, have obtained separate registration numbers under the provision of GST Act. On this factual background applicant has raised following question as stated above. Thus the question raised in this application related to determination of value of supply of goods between distinct persons as provided under chapter IV: Determination of Value of Supply of the GST Rules, 2017. As per the contention of the applicant, at present the company is discharging GST liability on transfer of goods from one Registrant to another Registrant of the company and the value of supply is determined on the basis of Rule 30 Of the GST Rules, meaning thereby that the value of supply is considered at one hundred and ten percentage of the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the principal shall be four thousand five hundred and fifty rupees per quintal or where he exercises the option, the value shall be 90 per cent. of five thousand rupees i.e., four thousand five hundred rupees per quintal. (b) where the value of a supply is not determinable under clause (a), the same shall be determined by the application of rule 30 or rule 31 in that order. 30. Value of supply of goods or services or both based on cost. Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services. 31. Residual method for determination of value of supply of goods or services or both. Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and the provisions of this Chapter: Provided that in the case of supply of services, the supplier may opt for this rule, ignoring Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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