Value in case of branch transfer
This query is : Resolved
06 July 2018
dear expert
we want to transfer finished goods from one branch to another which is interstate branch
i want to know at which price we can transfer goods.
is there any rule to determine the price charged for transfer or we can transfer at any price.
kindly help
we want to transfer finished goods from one branch to another which is interstate branch
i want to know at which price we can transfer goods.
is there any rule to determine the price charged for transfer or we can transfer at any price.
kindly help
06 July 2018
Practically you can transfer at any price. Because your Profit & Loss account will be consolidated. If not than, the authority to whom you are submitting branch's P&L, can ask to comply Arms Length Pricing.
06 July 2018
yes sir we consolidate the books of accounts of both
02 August 2025
Since you consolidate the books of both branches, you can transfer the finished goods between branches **at any price** you choose. There’s no strict regulatory requirement to fix the transfer price at a particular level for internal branch transfers when consolidation is done.
**However, a few points to keep in mind:**
* The transfer price should ideally reflect a **reasonable value** (like cost or cost plus a markup) for proper internal control and inventory valuation.
* If the branches are in **different states**, and GST is applicable, the transfer will be treated as a **supply** and GST will apply at the applicable rates on the transfer price you decide.
* For internal management and audit purposes, it’s best to have a consistent policy (e.g., transfer at cost or cost plus a fixed margin) to avoid confusion.
Since you consolidate accounts, any profit or loss on transfer will get eliminated in consolidation, so the overall financial results won’t be distorted.
**However, a few points to keep in mind:**
* The transfer price should ideally reflect a **reasonable value** (like cost or cost plus a markup) for proper internal control and inventory valuation.
* If the branches are in **different states**, and GST is applicable, the transfer will be treated as a **supply** and GST will apply at the applicable rates on the transfer price you decide.
* For internal management and audit purposes, it’s best to have a consistent policy (e.g., transfer at cost or cost plus a fixed margin) to avoid confusion.
Since you consolidate accounts, any profit or loss on transfer will get eliminated in consolidation, so the overall financial results won’t be distorted.
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