Branch transfer

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CA Mohit H. Madhuka (Querist)
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02 June 2014 VAT Liablity

ABC company has H.O in Uttar Pradesh and Branch Office at Maharashtra

HO Purchase goods from Up at 104 (100+ 4 VAT) transfer said goods to its branch at Maharashtra At cost 100 , and Branch sold the goods in maharashtra at (100+4 VAT),

What will be the VAT Libality Of Both HO And Branch

Whether HO Get the credit of Rs.4 as input credit on goods send to the branch ,
or whether branch get the input VAT paid by the HO.

CA Mohit H. Madhuka

CA Mohit H. Madhuka (Querist)
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02 June 2014 please give the answer

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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18 July 2024 In the scenario described, let's analyze the VAT liability for both the Head Office (HO) in Uttar Pradesh (UP) and the Branch Office in Maharashtra:

### VAT Liability for HO (Uttar Pradesh):

1. **Purchase of Goods in UP:**
- ABC Company purchases goods in Uttar Pradesh for Rs. 100 + VAT of Rs. 4, making the total cost Rs. 104.
- VAT paid on purchase = Rs. 4.

2. **Transfer of Goods to Branch (Maharashtra):**
- The goods are transferred from UP to Maharashtra at a cost of Rs. 100.
- Since this is an inter-branch transfer within the same company, VAT is not applicable on the transfer itself.

3. **Input Tax Credit (ITC) for HO (UP):**
- The HO in UP can claim Input Tax Credit (ITC) of Rs. 4, which is the VAT paid on the purchase of goods in UP.
- This ITC of Rs. 4 can be utilized by the HO against its output VAT liability in UP.

### VAT Liability for Branch (Maharashtra):

1. **Sale of Goods in Maharashtra:**
- The Branch in Maharashtra sells the goods at a selling price of Rs. 104 (inclusive of VAT).
- VAT collected on sale = Rs. 4.

2. **Output Tax for Branch (Maharashtra):**
- The Branch in Maharashtra is liable to pay VAT on the sale of goods at the rate applicable in Maharashtra.
- Output VAT liability = Rs. 4 (collected from the sale to the customer).

### Summary:

- **HO (Uttar Pradesh):**
- Input Tax Credit (ITC) of Rs. 4 can be claimed on the VAT paid for the goods purchased in UP.
- No VAT liability arises on the transfer of goods to the Branch in Maharashtra.

- **Branch (Maharashtra):**
- Collects VAT of Rs. 4 on the sale of goods.
- Pays this collected VAT to the Maharashtra tax authorities as its output tax liability.

### Clarification:

- The HO in UP gets the benefit of Input Tax Credit (ITC) for the VAT paid on goods purchased in UP. This ITC can be set off against its output VAT liability in UP.
- The Branch in Maharashtra is responsible for collecting and remitting VAT on the sale of goods in Maharashtra, based on the selling price inclusive of VAT.

This structure ensures that each location (HO and Branch) complies with VAT regulations applicable to their respective states and optimizes the utilization of Input Tax Credits where applicable. Always consult with a tax advisor or accountant familiar with VAT laws in UP and Maharashtra for specific advice tailored to your company's circumstances.

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