GST for Multi-state Businesses: Branch Transfers, Cross-charges and ISD

A company with offices or warehouses in several states has one PAN but several GST registrations. Under GST, those registrations are 'distinct persons', and dealings between them have tax consequences many businesses miss. This guide explains them.

Distinct Persons

Each state registration of the same business is treated as a distinct person. Supplies between them are taxable, even without consideration, as supplies between related persons.

Stock Transfers

Goods sent from a warehouse in one state to a branch in another are an inter-state supply, attracting IGST. An invoice is needed, and an e-way bill for the movement. The receiving branch can claim the IGST as credit.

Head Office Cross-charges

A head office often provides services to branches — management, finance, HR, IT, and shared staff. Where the branches are in other states, these are taxable supplies. The value is determined under the valuation rules for related persons. Where the receiving branch is entitled to full credit, the value declared in the invoice is generally accepted.

Input Service Distributor (ISD)

Common services — like software subscriptions, audit fees, or advertising — are often billed to head office but used by all branches. The ISD mechanism distributes the credit on such services to the branches that use them. From April 2025, businesses receiving such common input services for multiple registrations are required to distribute the credit through an ISD registration.

Why It Matters

• Credit can get stranded in one registration while another pays tax in cash.
• Missing cross-charges or stock transfer invoices can lead to demands, with interest and penalty.
• Inconsistent treatment across states attracts questions from multiple authorities.

Practical Steps

1. Map all registrations and the flows of goods and services between them.
2. Set up invoicing for stock transfers and cross-charges.
3. Register and operate an ISD for common services.
4. Document the valuation approach.
5. Reconcile inter-branch supplies across registrations.

Getting Help

Think Filing sets up GST processes for multi-state businesses, including cross-charges and ISD.