TMI Blog2019 (6) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... s, has been specified to determine the value of transaction between related persons. As per second proviso to Rule 28, if the recipient is eligible for full input tax credit, the invoice value will be deemed to be open market value. Applicant has informed this authority that they intent to issue invoice inter alia declaring value of supply liable to GST and they further informed that the recipient is eligible to claim full input tax credit. There is no breach by the applicant by changing the method of determination of value of supply by application of Rule 28 instead Rule 30 of the GST Rules. Thus, the applicant can apply Rule 28 of the GST Rules, 2017 to determine the value of supply of goods for supply of goods by one distinct entity (factory/depot) as defined u/s25(4) of the CGST Act to another entity having same PAN (factory/depot). - GST-ARA-84/2018-19/B-30 - - - Dated:- 19-3-2019 - SHRI B. TIMOTHY, AND SHRI B.V. BORHADE, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from its factories and depots located all over India. To reach out customers on time and to maintain optimum inventory at depot level, there is always flow of goods from factory to depot and from depot to depot. All depots and factories are engaged in supplying only taxable goods. In some instances company supplies paints at free of cost but after duly discharging GST on taxable value of such goods as per open market value. Apart from paints, there is also flow of raw materials, capital goods and other goods from one factory to another factory across the country. At present company is discharging GST liability on such transfer of paints, raw materials, capital goods and other traded goods from one factory/depot to another factory/depot, after valuing them on the basis of one hundred and ten percentage of manufacturing cost as prescribed under rule 30 of the CGST Rules 2017. 1.3 As per second proviso to Rule 28 of CGST Rules 2017, value of supply of goods by one distinct entity to another distinct entity where the recipient is eligible for full input tax credit, would be the value declared in the invoice. 1.4 Factories and depots of the company are duly qualifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered as Open Market value for the purpose of determine taxable value of goods. 3. Question on which advance ruling is required Whether value 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. 4. Our submission 4.1 To reach out to customers on time and to maintain optimum inventory at depot level, there is always flow of goods from factory to depot and from depot to depot. All depots and factories are engaged in supplying only taxable goods. 4.2 Apart from paints, there is also flow of raw materials, capital goods and other goods from one factory to another factory across the country. 4.3 At present company is discharging GST liability on such transfer of paints, raw materials, capital goods and other traded goods from one factory/depot to another factory/depot, after valuing them on the basis of one hundred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 as amended) to another factory/ depot (another distinct entity) on the basis of our cost of production. Our cost production depends mainly on cost of inputs and input services hence the same fluctuates with the price of inputs and input services. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- With reference to above subject in case of, M/s. KANSAI NEROLAC PAINTS LIMITED. GSTIN: 27AAACG1376N2ZB, it is submitted that, Issue on which advance ruling is required: Whether supply of goods by one distinct entity (factory / depot)as defined under section25(4) of CGST Act 2017 as amended, to another distinct entity having same PAN (factory / depot) , can be determined in terms of the cost price under second proviso to Rule 28 of CGST Rules 2017. Acceptance/ rejection of application- As per Section 98 (2) of CGST Act 2017, the above issue on which Advance Ruling is required is acceptable under - Determination of Value of Supply of goods) Legal Submission: Rule 28: - CGST Rule 28: Value of supply of Goods or Services or both between Distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmission of application as per contentions made in their application. At the time of hearing on admissibility of the application, applicant was informed that the q uestion raised in the application as aforesaid was not covered by the scope of section 97 of the GST law. They were given eight days time to reframe the question. The applicant has reframed the question on 04.12.2018 and was called on 16.01.2019 for hearing when Sh. Subhasis Banerjee, FCA, along with Sh. Sandesh Shinde, Executive Accounts appeared and argued the question. Jurisdictional Officer Ms. Manjiri Phansalkar, Dy. Commissioner of S.T. (E-611) LTU, Unit-4, Mumbai, appeared and made written submissions. The application was admitted and called for final hearing on 27.02.2019, Sh. Subhasis Banerjee, FCA, along with Sh. Sandesh Shinde, Executive Accounts appeared and submitted written submissions. The Jurisdictional officer Ms. Manjiri Phansalkar, DC of S.T. (E- 611) LTU, Unit-4, Mumbai, appeared and made written submissions. We heard both the sides. 05. OBSERVATIONS We have gone through the facts of the case. The issue put before us is in respect of a determination of value of supply of goods o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply is considered at one hundred and ten percentage of the manufacturing cost. Now, the applicant, by filing present application, want to explore the value of supply of goods as per Rule 28 and in particular the second proviso of the said rule and whether they can opt for the same. We shall now refer to Rule 28, Rule 30 and Rule 31 to understand the basis of Valuation Rules. The rules are reproduced as below: 28. Value of supply of goods or services or both between distinct or related persons, other than through an agent. The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall- (a) be the open market value of such supply; (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality; (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order: Provided that where the goods are intended for furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istent 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 30. As per the scheme of GST, tax is payable on ad-valorem basis and taxable value is the transaction value i.e. the price actually paid or payable, provided the supplier and recipient are not related and the price is the sole consideration. In the case at hand, the factory, the depots located in different states sharing common PAN but different GST registrations are distinct person as specified in subsection (4) of Section 25 of the GST Act. Under the GST law, various categories of persons such as related persons, distinct persons have been identified as the relation between the supplier and recipient may influence the consideration. In such cases specific rules have been provided. Rule 28 of the GST Rules, has been specified to determine the value of transaction between related persons. We also find that Rule 30 will come in to operation in a situation where the value of a supply of goods or services or both is not determinable by any of the rules preceding ..... 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