Complete GST lifecycle on one platform Complete GST lifecycle on one platform
Hyper-automation Hyper-automation
Smart reports & recon Smart reports & recon
Accurate filing Accurate filing

Impact on Stock Transfer under GST



Updated on: Jan 12th, 2022


5 min read

It is quite common in a business having PAN India transactions to transfer its stock to its other units, depots, warehouses to cater to timely delivery orders from different geographical locations. Under the pre-GST scenario, inter-state or intra-state stock transfers are subjected to a levy of excise duty on the removal of goods. The same is not subject to VAT/ CST. Under the model of GST, tax is collected on the supply of goods with or without consideration being paid or agreed to be paid.

Meaning of supply under GST

Under Model GST Law, the term ‘supply’ includes transactions between a principal and an agent. As per clause 3 read with the schedule I of GST law, a supply of goods by a taxable person to another taxable person or non-taxable person during furtherance of a business without consideration is also included within the ambit of ‘supply’. Further, the subject matter of concern would be the valuation of the stocks being transferred and the availability of Input Tax Credit under the brain wave of CGST, SGST and IGST.


Valuation is the substance for levy, collection and administration of taxes under any tax law since its origin. Valuation has always impacted indirect tax laws over the past years which was barefaced for generating tax revenues for Central as well as state governments. Same have not been dispensed with under GST regime as well. The valuation rules continue to tax invariably every corner of the business episode. The impact on stock transfer under GST would even not be spared.

As per clause 15 of GST Law, the value of supply of goods shall be the price paid or agreed to be paid during supply subject to supplier and recipient not being related and price being sole consideration. As per rule 3(4) of GST Valuation Rules even in the case of supplier and recipient being related, the value would be accepted to be the price paid or agreed to be paid where the price is not influenced by the relation.

Transaction value is the price paid or payable for the supply of goods. As a stock transfer, do not compass a consideration, this provision cannot be implemented. Valuation Rules provides that if the transaction value is not available, then the transaction value of goods of like kind and quality should be considered.

Further, if goods of like kind and quality are not available, then the computed value i.e. the cost of production, general expenses and profit, should be adopted. Where a supply for consideration of goods of like kind and quality is available, such value is to be adopted, in absence of same, the cost of sales considered

Impact on Free Supplies

Under the pre-GST scenario, free supplies are subjected to excise only. However, under GST, the supply of goods between persons without consideration is deemed to be a “supply”. Hence, the stock transfer of promotion materials/ free samples will be subject to GST. The transaction value would be the value of goods of like kind and quality or the cost of sales. So, the promotion expenses of companies like FMCG, Pharma will increase.

The overall impact of GST on stock transfer

With the shift of taxable events from sales to supply consequentially stock transfers under GST would be taxed and this scenario would certainly impact key industries such as FMCG, Pharma etc. The impact would be to the extent of costs savings in procurement, review procurement contracts, free supplies, discount schemes, product pricing and the overall financial impact of GST.

In the case of seasonal industries where the sale happens in specific periods (fertilizer, woollen, clothes etc) entrepreneur would need to pay in cash (or through accumulated credit) in the month/ quarter of dispatch resulting in blockage of working capital. e-way bills and check-post related compliance would affect removal, optimization of delivery schedules, operating cost and competitive pricing.

Further, due to huge volume transfers, detailed scrutiny by tax authorities would be a matter of entanglement. To pass the motive of GST and its transparency it would be well-suited to set an alternate method for valuation based on cost plus a certain percentage to lower related cost to taxpayers and administration cost for government.

inline CTA
India’s Fastest and Most Advanced 2B Matching
Maximise ITC claims, use smart validations to correct your data and complete 2B matching in <1 minute
About the Author

DVSR Anjaneyulu, known by the name AJ, I've got a vast experience in accounting, finance, taxes and audit. I'm always keen to simplify laws for the readers and learn about the Indian finance ecosystem. I also love listening to music, travelling, and, most importantly, conversing with people to better understand the world.. Read more


Quick Summary

Under GST, stock transfers are now taxed on the supply of goods with or without consideration. Valuation of stocks transferred and Input Tax Credit availability are crucial. Impact on industries like FMCG and Pharma to review procurement, free supplies, and pricing strategies. Considerations include e-way bills, compliance, working capital blockage, and the need for transparent valuation methods.

Was this summary helpful?

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use


ISO 27001

Data Center


SSL Certified Site

128-bit encryption