TMI Blog2019 (8) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... rson 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 simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/-each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2. The Applicant has stated that they import as well as locally procure Lenses, Frames, Sun Glasses, Contact Lenses as well as Reading Glasses, Complete spectacles and are engaged in re-selling them. They have their office in Tamil Nadu at Chennai. They also have branches outside the state of Tamil Nadu and the goods imported and re-sold by the applicant are also transferred to their branches located outside the State for subsequent supply to ultimate customers. In the present case as the branches are distinct persons, they are required to discharge the CGST/SGST/IGST as applicable while supplying the goods to their branches outside the State. Rule 28 of GST rules, 2017, provides three options for determining the value in respect of supplies to distinct/ related persons. These options are governed by two provisions. The 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. Hence, in their view if the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y pay the tax at the time of supply of goods from the State of Tamil Nadu on the value arrived by taking into account the cost price in the tax invoice while dispatching the supplies to other States. The claim as we observe is that the value need not be as per first proviso to Rule 28, even though such price be available. 4.1 From the submissions, before us, we find that the applicant imports as well as locally procure Lenses, Frames, Glasses, Contact Lenses, etc and is engaged in re-selling them. The applicant has branches outside Tamil Nadu where, the applicant transfers these goods for further selling from these branches. These branches are distinct persons as per GST Law. Section 25 of CGST Act states (4) A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Accordingly, the applicant and his branch office outside Tamil Nadu are distinct persons and should have separate GST registrations. They import as well as locally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. 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. The same is provided under Rule 28 of CGST Rules, 2017, which is as under: Rule 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Tamil Nadu and its branches outside Tamil Nadu. As per the applicant, there are supplies being made to such unrelated recipients within Tamil Nadu who are being supplied at the same time of such supply for which price is the sole consideration. Thus, there exists an open market value for such supplies being made to distinct recipients who are branches of the applicant in different states/ Union territories. Thus, there is no necessity to go further down to Rule 28(b) or (c) as they are to be read sequentially and are also applicable only when open market value is not available. Once Rule 28(a) is applicable, Rule 28(b) or (c) cannot be used by the applicant for determining the value of the supply of goods between distinct persons. 4.4 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nput tax credit for the applicant, which is not the intention of a taxation based on value addition. Further, if a taxpayer can skip all the provisions under Rule 28(a) to (c), in spite of them being specifically mentioned as the value which shall be adopted, then in no scenario will any taxpayer ever use Rule 28(a) to (c). Both provisos are to be read together and not independently, i.e. the applicant cannot choose whichever proviso is favourable to them. Therefore, 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. 5. In view of the above discussions, we rule as under: RULING The value in respect of supply of goods i.e. Lenses, Frames, Sun Glasses, Contact Lenses as well as Reading Glasses, Complet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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