Valuation of supply — The Applicant is stated to be a Re-seller and Importer of Sun Glasses, Frames, Lenses, Contact Lenses, etc. having Head Office in West Bengal. Goods, namely, Optical Lenses and Frames for Spectacles and Accessories, are transferred from the Head Office in West Bengal to its branches in other states. Advance Ruling has been sought on whether such goods supplied to the branches in states other than West Bengal can be valued in terms of the Cost Price under the Second Proviso to Rule 28 of CGST Rules, 2017, instead of 90% of MRP as required under the First Proviso of the same Rule. Authority for Advance Ruling, West Bengal held that:—Rule 28 provides that the value of a supply to a distinct person shall be the open market value, if available, of such supply. The First Proviso states that "Provided that where the goods are intended for further supply as such by the recipients, the value shall, at the option of the supplier, be an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer, not being a related person". The Second Proviso to Rule 28 states "Provided further, that where the recipient is eligible for full input tax credit, the value declared in the Invoice shall be deemed to be the open market value of the goods or services. As input tax credit is not available unless there is an invoice or document of like nature [Section 16(2)(a)], the above proviso has to be interpreted with reference to specific invoices. Hence all Invoices or documents of like nature under Section 16 of GST Act, of goods for further retail sale or for use in the business (non-trading stock such as stationery and office equipment) transferred to branches considered as distinct persons being located in States other than West Bengal, are valid documents eligible for Input Tax Credit.
The Applicant has the option of not supplying goods to its branches under the First Proviso of Rule 28 and is eligible to value these goods by applying the terms of the Second Proviso to Rule 28 of GST Act. The expression "where the recipient is eligible for full input tax credit", as used in the Second Proviso to Rule 28 of CGST Rules, 2017, means that the recipient will be eligible to take full input tax credit of the amount of tax paid by the suppler as mentioned in the respective invoice or any other document valid under Section 16(2)(a) of GST Act. — GKB Lens Pvt Ltd. In Re..... [2018] 51 TUD 105 (AAR-WB)