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CA Intermediate · Taxation · Supply under GST

Ananya Pvt Ltd, Mumbai, sends a machine to its own branch in Chennai (registered separately in Tamil Nadu) for use in the branch's business. No invoice-value payment is made. Under GST, this transaction is:

The transfer is a supply even without consideration, because the head office and the Chennai branch are registered in different States and are treated as distinct persons. Schedule I treats such inter-unit supplies made in the course of business as taxable, attracting IGST.

  1. ANot a supply, as both are the same legal entity
  2. BA supply, as establishments in different States are distinct persons and the transaction is in the course of businessCorrect
  3. CExempt supply, as it is a stock transfer
  4. DA supply only if the machine is sold within 6 months

Explanation

Under Schedule I, supply of goods or services between related or distinct persons, in the course or furtherance of business, is treated as supply even without consideration. A registered person with establishments in different States is treated as distinct persons under section 25(4). So the transfer is a taxable supply (IGST). Option A is wrong for that reason.

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