Rule 54(1A) for Distributing ITC
This query is : Resolved
28 October 2025
We have all over India branches. Head office is in Maharashtra state.
Suppose transport bill received by Gujrat unit for receiving service to multi state location & also RCM liabilities paid by gujrat normal unit.
Can Gujrat normal unit raise his invoice for distributing RCM transport lTC on Pune H. O
Under rule 54 (1A )
Suppose transport bill received by Gujrat unit for receiving service to multi state location & also RCM liabilities paid by gujrat normal unit.
Can Gujrat normal unit raise his invoice for distributing RCM transport lTC on Pune H. O
Under rule 54 (1A )
05 November 2025
Yes, The transfer of Input Tax Credit (ITC) to an Input Service Distributor (ISD) is governed by the provisions under Section 20 of the CGST Act, 2017, along with the rules prescribed under CGST Rule 39. The Gujarat unit can raise an invoice to transfer input tax credit (ITC) for transport services received under reverse charge mechanism (RCM) to the Pune head office, provided relevant conditions are met.
05 November 2025
Sir pl. Tell me what is relevant condition.
Sir, I heard that Rcm paid normal unit & ISD unit must located in same state, is it true
Sir, I heard that Rcm paid normal unit & ISD unit must located in same state, is it true
05 November 2025
Key Points to Consider:
Inter-Unit Transactions (Cross-State) under GST:
Since your Gujarat unit and Maharashtra (Pune) Head Office are in different states, any inter-unit transaction, including the distribution of RCM charges, will be treated as an inter-state supply for GST purposes.
Therefore, the Gujarat unit will need to raise an invoice with IGST (Integrated GST).
RCM Liabilities:
The Gujarat unit paid the RCM liabilities, so it has borne the cost of transport services.
The Gujarat unit can raise an invoice to allocate or pass on this RCM liability to the Pune H.O., and the invoice should capture the amount of RCM transport LTC along with the applicable IGST on the inter-state transaction.
GST Treatment on Reimbursement:
The invoice raised by Gujarat to the Head Office will generally be considered as a reimbursement of the expense. According to GST rules, a reimbursement of expenses (like transport charges) is considered a supply under GST and subject to tax, especially in the case of inter-unit transfers.
If the Gujarat unit is directly passing on the transport expenses (without any markup), the invoice should specify the details clearly, showing the original RCM liability, and include the relevant tax (IGST).
Input Tax Credit (ITC) Considerations:
The Head Office in Maharashtra (Pune) should be eligible to claim the Input Tax Credit (ITC) on the IGST paid on the invoice raised by the Gujarat unit, provided the transport service is used for business purposes and the Head Office meets other eligibility criteria for ITC.
Proper Documentation:
It is essential that the Gujarat unit raises the invoice with the correct GSTIN and invoice details, and the invoice should also be properly recorded in the respective GST returns for both the Gujarat unit and the Maharashtra Head Office.
The Gujarat unit will also need to reflect the output tax on this supply in its GST returns.
Inter-Unit Transactions (Cross-State) under GST:
Since your Gujarat unit and Maharashtra (Pune) Head Office are in different states, any inter-unit transaction, including the distribution of RCM charges, will be treated as an inter-state supply for GST purposes.
Therefore, the Gujarat unit will need to raise an invoice with IGST (Integrated GST).
RCM Liabilities:
The Gujarat unit paid the RCM liabilities, so it has borne the cost of transport services.
The Gujarat unit can raise an invoice to allocate or pass on this RCM liability to the Pune H.O., and the invoice should capture the amount of RCM transport LTC along with the applicable IGST on the inter-state transaction.
GST Treatment on Reimbursement:
The invoice raised by Gujarat to the Head Office will generally be considered as a reimbursement of the expense. According to GST rules, a reimbursement of expenses (like transport charges) is considered a supply under GST and subject to tax, especially in the case of inter-unit transfers.
If the Gujarat unit is directly passing on the transport expenses (without any markup), the invoice should specify the details clearly, showing the original RCM liability, and include the relevant tax (IGST).
Input Tax Credit (ITC) Considerations:
The Head Office in Maharashtra (Pune) should be eligible to claim the Input Tax Credit (ITC) on the IGST paid on the invoice raised by the Gujarat unit, provided the transport service is used for business purposes and the Head Office meets other eligibility criteria for ITC.
Proper Documentation:
It is essential that the Gujarat unit raises the invoice with the correct GSTIN and invoice details, and the invoice should also be properly recorded in the respective GST returns for both the Gujarat unit and the Maharashtra Head Office.
The Gujarat unit will also need to reflect the output tax on this supply in its GST returns.
06 November 2025
Whether we follow ISD or cross charges
Gujrat & Maharashtra are different state - is it ok to transfer only rcm itc of gujrat to Maharashtra
Gujrat & Maharashtra are different state - is it ok to transfer only rcm itc of gujrat to Maharashtra
06 November 2025
Gujarat unit can transfer RCM ITC to Maharashtra HO, but only via ISD mechanism—not cross charge—if the ITC pertains to common input services used by multiple units. Section 20 and Rule 39 of CGST Act mandate ISD route for such distribution.
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