What is Stock transfer between GSTINs?

Why GST treats it as a supply

Each GST registration of a business is a distinct person under GST, even though they share one PAN and are one legal entity. A movement of goods between two GSTINs is a supply between distinct persons, and the law treats it as a supply even when no payment is made. Between states, it carries IGST.

A movement between two places registered under the same GSTIN, for example a principal place of business and an additional place of business in the same state, is not a supply. It moves on a delivery challan, with an e-way bill where one is required.

When ecommerce sellers do it

• Sending stock to a marketplace fulfilment centre in another state, after registering that state's GSTIN.
• Moving stock from a central warehouse to regional warehouses for faster delivery.
• Pulling back unsold or returned stock from a fulfilment centre to the main warehouse.

Documents

1. A tax invoice from the sending GSTIN to the receiving GSTIN.
2. An e-way bill for the movement of goods, where the rules require one.
3. An e-invoice, if the business's turnover is above the notified e-invoicing limit.

The receiving GSTIN claims the tax as ITC once the invoice appears in its GSTR-2B and the goods are received.

The value on the invoice

The rules value a supply between distinct persons at its open market value. Where the receiving GSTIN is entitled to full input tax credit, the value declared on the invoice is accepted as the open market value. In practice most sellers transfer stock at cost or landed cost. Use one consistent basis and record it in your transfer policy.

In the books

The transfer is not revenue in the company's financial statements, because the company is moving its own stock. Keep the GST invoice and the stock movement in a branch or stock transfer account, and reconcile the outward transfers of one GSTIN with the inward transfers of the other every month. A difference usually means goods in transit, a missing invoice or a short receipt.

Watch the cash

The IGST is paid by the sending GSTIN when the goods move, but the receiving GSTIN uses the credit only as it makes sales. If the receiving state's sales are small, or its output tax rate is lower than the rate on the transfer, credit can build up there.