Your Surat godown is loading ₹6,40,000 of stock for your Mumbai branch. Is that a sale? Under GST, it depends on one thing: whether the Mumbai branch has its own GSTIN. If it does, the transfer is a taxable supply, you raise a tax invoice and charge IGST. If both locations sit under the same GSTIN, nothing is supplied, and a delivery challan does the job.
Most of the confusion around stock transfers comes from mixing those two cases. This guide separates them, then covers the parts that usually go wrong in practice: what value to put on the invoice, when the e-way bill and e-invoice apply, and how the entries should look in both sets of books.
Is a stock transfer between branches a supply under GST?
GST treats every registration as a separate taxpayer. Section 25(4) of the CGST Act says a person with more than one registration is a “distinct person” for each of them. Paragraph 2 of Schedule I then says supplies of goods between distinct persons are taxable even when no money changes hands.
So the test is simple:
Different GSTINs (usually different states, or a separate registration in the same state): the transfer is a supply. Raise a tax invoice and charge GST.
Same GSTIN (a head office and a godown added as an additional place of business): there is only one taxpayer, so there is no supply. Move the goods on a delivery challan under Rule 55.
Moving goods from Gujarat to Maharashtra always means two GSTINs, because a registration is state-wise. Moving goods within Gujarat can go either way, so check the registration certificate before you decide on the document.
What value should you put on a branch transfer invoice?
There is no sale price between two branches, so Rule 28 of the CGST Rules decides the value. It gives this order:
The open market value of the supply.
If that is not available, the value of goods of like kind and quality.
If neither works, cost plus 10% under Rule 30, and then the residual method under Rule 31.
Two provisos change how this works day to day. If the receiving branch will resell the goods as they are, you may choose to value the transfer at 90% of the price that branch charges its unrelated customers. More useful still: if the receiving branch is eligible for full input tax credit, the value you declare on the invoice is treated as the open market value.
That second proviso is why most trading businesses transfer at cost and face no dispute. The tax charged by one branch comes back as credit to the other, so there is no revenue loss for the department to chase. The GST Council’s flyer on valuation in GST explains the same order of methods.
When does the invoice value actually get questioned?
Valuation starts to matter when the receiving branch cannot take full credit. Common cases:
The receiving branch also makes exempt supplies, so part of its credit is reversed.
The goods are for the branch’s own use in a way that blocks credit under Section 17(5).
The receiving branch pays tax under a scheme where credit is not available.
In these situations, a cost-level invoice can be challenged as undervalued. You then need a defensible value: the price you charge unrelated buyers for similar goods, or 90% of the branch’s resale price if it resells as is, or cost plus 10%. Keep the working on file. An officer asking about valuation two years later will want the basis, not just the figure.
A worked example: Surat to Mumbai
Say you run a plywood and hardware distributorship registered in Gujarat (GSTIN starting 24), with a branch in Mumbai registered in Maharashtra (GSTIN starting 27). On 14 November you send a lot of plywood whose landed cost is ₹6,40,000. Assume the goods attract 18% GST. The Mumbai branch only sells taxable goods, so it can take full credit.
Case 1: transfer at cost, full ITC at Mumbai
Taxable value: ₹6,40,000 (accepted as open market value under the second proviso)
IGST at 18%: 6,40,000 × 18% = ₹1,15,200
Invoice total: ₹7,55,200
Surat reports ₹1,15,200 as output IGST. Mumbai sees the same ₹1,15,200 in its GSTR-2B and claims it. Across the business, the tax nets to zero. What changes is where the credit sits: it moves from Gujarat to Maharashtra, which is often exactly what you want when Mumbai is the branch making the final sales.
Case 2: the same lot, but Mumbai makes some exempt supplies
Now the cost-level invoice is weaker, because Mumbai will reverse part of its credit. If there is no market price for an identical lot, cost plus 10% is the fallback:
Taxable value: 6,40,000 × 110% = ₹7,04,000
IGST at 18%: 7,04,000 × 18% = ₹1,26,720
Invoice total: ₹8,30,720
The difference in tax is ₹11,520. Small on one lot. Across a year of weekly transfers, it is the kind of number that turns up in a notice with interest attached.
Which documents does each type of transfer need?
Point | Same GSTIN (HO to own godown) | Different GSTINs (branch in another state) |
|---|---|---|
Is it a supply? | No | Yes, between distinct persons |
Document | Delivery challan (Rule 55) | Tax invoice |
GST charged | None | IGST if inter-state; CGST and SGST if the other GSTIN is in the same state |
E-way bill | Required when the consignment value exceeds ₹50,000, as a movement other than supply | Required when the consignment value exceeds ₹50,000 |
E-invoice (IRN) | Not applicable to a challan | Required if your aggregate turnover crossed ₹5 crore in any year from 2017-18 |
GSTR-1 | Not reported as a supply | Reported as a B2B supply to the other GSTIN |
ITC | No tax, so no credit | Receiving branch claims it through GSTR-2B |
How do e-way bills work for branch transfers?
Rule 138 covers movement of goods for reasons other than supply, so a same-GSTIN transfer still needs an e-way bill once the consignment crosses ₹50,000. On the portal, choose the delivery challan as the document and “For Own Use” as the reason. For a transfer to another GSTIN, the document is the tax invoice and the reason is “Supply”.
A few portal rules that catch people out:
From 1 January 2025, you cannot generate an e-way bill for a document dated more than 180 days earlier.
Validity for normal cargo is one day for every 200 km or part of it, counted from the first Part B entry.
Intra-state movements follow each state’s own notification, and some states set different limits. Check your state before relying on ₹50,000 for a local godown transfer.
For the full breakdown of challan-based movements, see our guide to delivery challans under Rule 55.
Does a branch transfer need an e-invoice?
Yes, if your business is above the e-invoice threshold. E-invoicing applies once aggregate turnover has exceeded ₹5 crore in any financial year from 2017-18 onwards. Aggregate turnover is worked out for the whole PAN, so a small branch does not escape just because its own sales are low.
The invoice to another GSTIN is a B2B invoice, so it needs an IRN like any other. Businesses with aggregate turnover of ₹10 crore or more must also report invoices to the IRP within 30 days of the invoice date, a rule in force since 1 April 2025. Late branch transfer invoices are a common reason these get rejected, because they are often raised after the truck has already left.
How should the entries look in both sets of books?
Using Case 1 from the example, the Surat books record:
Mumbai Branch account: debit ₹7,55,200
Branch Transfer Out (a sales-type ledger): credit ₹6,40,000
Output IGST: credit ₹1,15,200
The Mumbai books record the mirror entry:
Branch Transfer In (a purchase-type ledger): debit ₹6,40,000
Input IGST: debit ₹1,15,200
Surat Head Office account: credit ₹7,55,200
Keep Branch Transfer In and Out separate from your normal sales and purchase ledgers. When you prepare combined financial statements, the two branch accounts cancel each other and the transfer ledgers are eliminated. If transfers are booked as regular sales, your turnover looks inflated and your gross margin looks thinner than it is. If the two branch accounts do not match at year end, something was booked on one side only. We cover the wider setup in running multiple GSTINs under one PAN.
A month-end check for branch transfers
Match every outward branch invoice in the sending GSTIN’s GSTR-1 against the receiving branch’s GSTR-2B.
Confirm every e-way bill above ₹50,000 was generated against the right document type.
Reconcile the two branch accounts. They should be equal and opposite.
Check stock in transit: goods dispatched on the 30th and received on the 2nd belong in stock in transit, not in both branches’ closing stock or in neither.
For any branch that is not eligible for full credit, keep the valuation working for that month’s transfers.
Where hisabkitab fits in
hisabkitab handles multi-location accounting with branch transfers, so stock leaves one location and arrives in another without a manual sale and purchase on each side. From the same transfer you can generate the e-invoice with IRN and QR and the e-way bill, and the invoice flows into GSTR-1 for the sending GSTIN.
With multi-company access, you can run each GSTIN as its own set of books under one login, and use GSTR-2B AI reconciliation on the receiving side to confirm the credit actually arrived. See how the e-way bill software works with transfers.
Frequently asked questions
Is GST payable on stock transfer within the same state?
Only if the two locations have different GSTINs. If the godown is an additional place of business under the same GSTIN, there is no supply and no GST, but you still need a delivery challan and possibly an e-way bill.
Can I transfer stock between branches at cost price?
Yes, in most cases. If the receiving branch is eligible for full input tax credit, the value declared on the invoice is treated as the open market value under Rule 28.
Which GST applies to inter-state branch transfers?
IGST. The sending branch charges it, and the receiving branch claims it as credit once it appears in GSTR-2B.
Is an e-way bill needed for stock transfer below ₹50,000?
Generally no, as ₹50,000 is the consignment value limit. Inter-state movements for job work and certain handicraft goods are exceptions that need an e-way bill whatever the value.
Should branch transfers be shown as sales in the profit and loss account?
Not in combined financial statements. Book them in separate branch transfer ledgers so they can be eliminated, leaving only sales to outside customers in turnover.
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