GST Cross-Charge refers to the process of charging GST on services or goods supplied between different branches or units of the same legal entity, located in different states or union territories in India. Even though these branches belong to the same company, GST law treats them as separate entities if they have different GST registrations. Therefore, when one branch provides a service to another, GST must be applied and reported as if it were a transaction between two unrelated parties.
This mechanism ensures that the correct amount of tax is credited and accounted for in the respective state where the service is consumed. For instance, if a head office in Mumbai provides administrative or IT support to its branch in Delhi, it must raise a tax invoice and charge GST on that service, even though both offices are part of the same organization.
GST Cross-Charge becomes especially important in scenarios involving shared services, centralized billing, or when businesses have multiple registrations across India. Properly applying cross-charges helps maintain compliance, ensures accurate Input Tax Credit (ITC) flow, and avoids disputes during GST audits or assessments.
Businesses must ensure timely invoicing, correct valuation of the service, and accurate documentation under this mechanism. It is also crucial during monthly and annual GST filings to report these inter-branch transactions correctly.
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