SKP Connect the GAAP
Volume 9 Issue 2 | 7 May 2016
Joint Commissioner clarifies that the transfer of goods among the dealer's own units having different TINs, qualifies as a sale

The Joint Commissioner (JC) of Kerala Valued Added Tax Act (KVAT), 2003 recently issued a clarification on the application made by the Malabar Regional Co-operative Milk Producers’ Union (MRCMPU). It stated that the transfer of goods between the own unit of a dealer having different VAT registrations (TIN) and the same PAN, is taxable under KVAT.
Facts of the case
  • The applicant is a dairy farmers organisation, located in six districts of Kerala, voluntarily holding different TINs for administrative convenience, all of them are owned and managed by MRCMPU, and have a single PAN card. They transfer the commodities dealt by them as stock transfers between their own units and contend that no sale is effected.
  • Accordingly, they had made an application requesting clarification on whether the transaction of the transfer of goods between own units of MRCMPU having a different TIN and the same PAN is taxable or not under the KVAT Act, 2003.
 Clarification by Order No. C3/5444/16/CT, dated 13 April 2016
Based on the facts and evaluation of the transaction in detail, the Kerala VAT authorities clarified that the transfer made by MRCMPU to its other unit qualifies as a sale. According to the KVAT law, each unit acquires the character of a separate legal entity and as per the statute, for the purpose of levy, assessment and collection of tax, each unit is to be treated as a separate one.
SKP's comments
According to the KVAT laws, technically an assessee/dealer should not procure multiple TINs under a single PAN. 

Under VAT legislation, an assessee/dealer is identified by his TIN. Each TIN acquires the characteristic of a separate legal entity. In this case, Section 20(3) of KVAT Act, 2003 is applicable on account of the voluntary application filed by the dealer. Thus, the transfer of goods among different units can only be treated as a sale, since each unit acquired is treated as a separate legal entity.

Considering the above clarification, it is imperative that businesses evaluate different units/TIN held by them under a single PAN in Kerala as well as other states. Business should also review whether such units owned by a single dealer can be construed specifically as a transfer or considered as a sale.

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