GST provision may lead to closure of branches & formation of shell firms

Deficiency in GST law to make firms transfer goods to branches outside state to pay interstate GST

The introduction of the goods and services tax (GST) in July will pose a challenge for the enforcement authorities due to a provision in the GST law that mandates companies transferring goods to a branch outside the state to pay the interstate goods and services tax (IGST). However, if the same company sells goods to customers on approval basis outside the state, it gets six months to pay the IGST.

Surendra Mehta, secretary, Indian Bullion and Jewellers Association (IBJA), said: “This provision will lead to branches closing down, and start shell companies at branch locations to defer the payment.”

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