Valuation of Inter-state Stock Transfer under GST

Basic principle under GST says that transaction value should be accepted as value for the purpose of levy of GST between supplier and recipient. However, when it is the case of stock transfer between distinct persons but related parties i.e. stock transfer, transaction value cannot be accepted for valuation.

This leaves us in a dilemma as to how to value the supply which is made by 1 branch of business to another branch of same business.

Answer to this question has been provided in ‘Determination of value of supply of Goods and Services rules, 2016’ which prescribes following methods for the valuation of such transfers –

Transaction value of goods or services of like kind: Where value of supply cannot be determined using transaction value the value shall be determined on the basis of transaction value of goods or services of like (similar) kind and quality supplied at or about the same time to customers.

Computed value method: Where the value of a supply of goods or services or both is not determinable by the previous method, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services.

Residual method: Where the value cannot be determined under the computed value method, the value shall be determined using reasonable means consistent with the principles and general provisions of these Rules.

Therefore the GST Valuation Rules provides that if the transaction value is not available, then the transaction value of goods of like kind and quality should be considered. Further, if goods of like kind and quality are not available, then the computed value, i.e. the cost of production, general expenses and profit, should be adopted