Input tax credit—stock transfer from the Head Office of M/s. GKB Lens Pvt. Ltd. to its branches in other States at Zero Value—This appeal has been filed by the Assistant commissioner against the Advance Ruling No. 07/WBAAR2018-19 dated 30.05.2018 pronounced by the West Bengal Authority for Advance Ruling.

The issue is that—whether the transfer of goods from Head Office in West Bengal to its branches in other states, can be done at cost price, by applying the second proviso to Rule 28 of CGST Rules (instead of 90% of MRP as required under the First Proviso to Rule 28 of CGST Rules) and what is meant by 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.

According to the appellant “the wordings of the Ruling dated 30.05.2018 has created an impression that the recipient would be eligible for Input tax Credit if the supplier paid the tax.” Instead of those wordings the WBAAR should have declared in no uncertain terms that no input tax credit would be available for supply at Zero Value.

Held that—From a plain reading of law laid down under section 16 of the GST Act, it is clear that, inter alia, input tax credit is available only when the recipient is in possession of a tax invoice or debit note issued by the supplier registered under the GST Act, and in case of a supply between distinct and/or related persons, as between Head Office and Branches, the value declared in the invoice shall be deemed to be the open market value of the goods or services supplied. It is therefore clear that if the value declared in such invoice is zero no input tax credit is available to the recipient.

The Ruling of the West Bengal Authority of Advance Ruling is modified to the extent that at the end of the second paragraph of the said ruling the following sentence will be added—“No input tax credit, however, would be available for supply of goods / services at Zero Value.” [2018] 4 TAXLOK.COM 110 (AAAR-WB)