26 July 2024
When transferring assets between units or branches of the same company, especially when the assets have a Written Down Value (WDV) of zero, the applicability of GST depends on several factors. Here's a detailed explanation based on GST rules, logic, and relevant notifications:
### **1. GST on Transfer of Assets**
**a. **General Rule for Transfer of Assets:**
- **Inter-State Transfer:** When assets are transferred from one unit to another in a different state, it is considered an inter-state supply under GST. Even if the WDV of the asset is zero, GST may still apply because GST is levied on the supply of goods or services.
**b. **Applicability of GST:**
- **Zero WDV:** The zero WDV indicates that the asset has been fully depreciated, but it does not exempt the transfer from GST. The GST is applicable based on the value of the asset for the purpose of the GST law.
**c. **Value for GST Calculation:**
- **Value of Supply:** According to the GST law, the value of the supply for GST purposes includes the transaction value. The transaction value is generally the market value of the asset or the amount at which the asset is transferred. Even if the WDV is zero, GST is payable on the market value or the consideration received for the transfer.
### **2. Relevant Rules and Notifications**
**a. **CGST Act, 2017:**
- **Section 7(1) of the CGST Act:** - Defines the scope of supply, including the supply of goods or services, which encompasses the transfer of assets.
- **Section 15(1):** - Deals with the value of supply, which includes the transaction value. Even if the WDV is zero, the transaction value (market value or actual consideration) is considered for GST purposes.
**b. **Circulars and Notifications:**
- **CBEC Circular No. 34/8/2018-GST:** - Clarifies that when assets are transferred between related parties or different branches, GST is applicable based on the market value or consideration, even if the asset is fully depreciated.
- **Notification No. 12/2017-Central Tax (Rate):** - Lists various exemptions, but generally, transfers of assets are subject to GST unless specifically exempted.
### **3. Case Law and Practical Implications**
- **Case Law:** - While there might not be specific case law on zero WDV assets, general principles from GST jurisprudence confirm that the transfer of assets, regardless of their WDV, is subject to GST if it involves a supply.
- **Practical Implications:** - When transferring assets between units, ensure that GST is accounted for at the applicable rate based on the market value of the asset. Issue a proper invoice reflecting GST and maintain documentation for compliance.
### **4. Practical Steps**
**a. **Invoice Issuance:**
- **GST Invoice:** - Issue a GST invoice for the asset transfer, showing the market value of the asset and applicable GST.
**b. **Reporting and Compliance:**
- **GSTR-1 and GSTR-3B:** - Report the asset transfer and the GST in your GST returns (GSTR-1 and GSTR-3B). Ensure that the GST is accounted for as output tax.
**c. **Input Tax Credit:**
- **ITC on Transfer:** - If ITC was claimed on the asset during its acquisition, the transfer should be accounted for appropriately, ensuring that ITC adjustments are made if necessary.
### **Summary**
- **GST is applicable on the transfer of assets even if the WDV is zero.** - **The value for GST purposes is based on the market value or consideration, not the WDV.** - **Relevant GST provisions, notifications, and circulars support this applicability.**
For specific cases or further clarifications, it is advisable to consult with a GST expert or tax advisor to ensure accurate compliance with the GST regulations.
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