Question ID :
44737
ITC on subsidized Products to Company own Division in Other State
A manufacturing company producing taxable and exempt goods in Rajasthan and send some of exempt goods as sample @Rs.1/- per item excluding GST (whereas GST is Nil) to Delhi head office (Both have different GSTIN but related parties as PAN is Same) but the market price of such item is Rs.115/- per item. The main raw material also exempt received from other vendor but the other packing materials which is purchased by another division under same GSTIN and transferred to Manufacturing division through delivery challan, used in production of such exempt good is taxable under GST. How this would be treated as GST credit taken or reversal of ITC. can a organization sell Goods lesser than cost because it will create a gap between ITC availed and Output liability in case of taxable goods.
Posted by
UMESH SHARMA
on
Oct 14, 2024
Filed Under
GST
In this scenario, the manufacturing company must reverse the ITC on taxable packing materials used in the production of exempt goods, as per Section 17(2) of the GST Act, since the goods are exempt and no GST is charged on the sale of samples. Selling goods at a nominal price (Rs. 1/-) does not affect GST directly, but it may create a mismatch between the ITC availed on taxable inputs and the output liability (as no GST is charged on exempt goods), potentially leading to an excess input credit that cannot be utilized. The company must ensure proper documentation and compliance with GST rules, including the reversal of ITC, to avoid non-compliance and penalties.
Posted by
SACHIN KUMAR RAI on
May 12, 2025