Input tax credit on branch transfer

This query is : Resolved

CA Naishadh trivedi (Querist)
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24 August 2018 Dear Experts,

Our company is engaged in generation of electricity which is exempt from GST. One of our supplier from Tamil Nadu has shipped material at our Gujarat Unit and has issued of Rs 102 Crore (Basic - 86 Crore + 16 Crore GST). This material is required to be transferred to our Rajasthan Unit (our Branch). My questions are:
1) Whether Gujarat unit should raise invoice on 102 Crore or 86 Crore???
2) As final product i.e Electricity is exempt from GST, whether we can claim input tax credit???

Also provide relevant rules and sections in support of your answer. Thanks in advance

Rajesh Kumar

Rajesh Kumar (Expert)
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24 August 2018 Input tax credit is available only when the said inputs are used in providing taxable supply. As your supply is not taxable, input tax credit is not available [Section 17 of the CGST Act]. As input tax credit is not available, GST paid shall enter into the cost of the product.
However, in case of Gujrat Unit [presuming that it is registered under GST], it shall be making a taxable supply to Rajasthan unit. In that case, Gujrat Unit should take credit, issue taxable invoice to Rajasthan unit [86Cr plus GST] and transfer the material to Rajasthan unit.
Please confirm with your lawyers who understands your transactions closely.

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CA Naishadh trivedi

CA Naishadh trivedi (Querist)
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24 August 2018 Dear Rajesh Sir,

The Gujarat unit pays certain amount of GST on sale of scrap, tender sale, reverse charge on certain services. In the above mentioned case whether the credit can be utilized of 16 Crore [Amt Paid (including GST) to Tamil Nadu party and Amt Received from Rajasthan Site]
Whether Gujarat Site is correct in issuing invoice to Rajasthan Site of Rs 86 Crore + 16 Crore GST. This is the same amount of invoice which has been received from Tamil Nadu supplier.

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CA PRAVEEN

CA PRAVEEN (Expert)
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24 August 2018 nput tax credit is available only when the said inputs are used in providing taxable supply. As your supply is not taxable, input tax credit is not available [Section 17 of the CGST Act]. As input tax credit is not available, GST paid shall enter into the cost of the product. However, in case of Gujrat Unit [presuming that it is registered under GST], it shall be making a taxable supply to Rajasthan unit. In that case, Gujrat Unit should take credit, issue taxable invoice to Rajasthan unit [86Cr plus GST] and transfer the material to Rajasthan unit. Please confirm with your lawyers who understands your transactions closely
AGREE WITH ABOVE
Your input is common for Taxable & Exempted Goods.
If possible short input bills used for taxable Goods and take ITC
Otherwise help of formula as In GST for proportionate input used for exempt and taxable Goods.