Taxability of Stock Transfer under GST & Impact on Working Capital

Abstract

India, being a federal country has dual taxes. As far as changes are concerned, Goods and Services Tax is the biggest indirect tax reform in the history of India since Independence. Finally, Goods&Services Tax (hereafter referred to as GST), is implemented with effect from 1^st July 2017 is expected to result in greater transparency, an improved flow of credit and reduced trade barriers from a tax perspective. It is also expected that consequent to elimination of cascading effect of tax, then goods and services will become cheaper as well as broaden the tax base across the entire supply chain and across all the States / Union Territories. At present Stock Transfer from one State to another take place free of tax by way of issuance of Form F. However, under GST tax is required to be paid on inter-state stock transfers leading to additional working capital requirement depending on GST rate, valuation and availability of credit for utilization at the transferee state. This paper starts with a brief overview of GST, structure of GST, IGST and scope of supply. Finally this paper aims at identifying the mechanism to be adopted for valuation of interstate stock transfers to estimate the impact on the working capital.