Shared warehouse and GST issue

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394 Points Joined June 2021

Exclusively closely held Public Ltd Co and LLP are run by one family. Co brings Tea leaves from Assam to Kolkata and sells it to LLP for export. There is single warehouse in one building. So sale takes place when stored in warehouse and LLP arranges shipping Bill in own name and Cargo moves out.How to satisfy GST Dept, as there is no physical movement post sale from Co to LLP. Directors of Co take Partner's hat. Common decision-making centre.

Kindly guide 

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On 25 February 2025 at 20:39 Report
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Master in Accounts & high court Advocate
9434 Points Joined December 2011

This is a classic case of a closely held Public Ltd Co and LLP with common ownership and management. The GST department might scrutinize the transactions due to the lack of physical movement of goods post-sale. Here's a guidance to help you satisfy the GST department: Maintain Clear Documentation 1. *Separate financial records*: Ensure both the company and LLP maintain separate financial records, including invoices, ledgers, and bank statements. 2. *Clear sale and purchase agreements*: Have a well-documented sale and purchase agreement between the company and LLP, outlining the terms and conditions of the transaction. 3. *Warehouse management records*: Maintain accurate records of warehouse management, including storage, inventory, and dispatch details. Establish Arm's Length Transaction 1. *Independent decision-making*: Demonstrate that the company and LLP have independent decision-making processes, despite common ownership. 2. *Separate GST registrations*: Ensure both the company and LLP have separate GST registrations and file returns independently. 3. *Distinct business operations*: Show that the company and LLP have distinct business operations, with the company focused on domestic sales and the LLP focused on exports. Clarify the Sale and Delivery Process 1. *Define the point of sale*: Clearly establish the point of sale as the warehouse, where the goods are stored and sold to the LLP. 2. *Document the shipping process*: Maintain records of the shipping process, including the cargo movement and export documentation. 3. *LLP's role in export*: Emphasize the LLP's role in arranging the shipping and export documentation, demonstrating their involvement in the export process. Prepare for GST Audit 1. *Maintain transparency*: Ensure all transactions are transparent, and documentation is easily accessible. 2. *Be prepared to explain*: Be prepared to explain the business operations, sale and delivery process, and documentation to the GST department during an audit. 3. *Seek professional advice*: Consult with a tax professional or chartered accountant to ensure compliance with GST regulations and to address any specific queries or concerns. By following these guidelines, you can demonstrate the legitimacy of the transactions between the company and LLP, and satisfy the GST department's requirements.

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On 25 February 2025 at 22:16


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