Transferring raw materials or finished products between factories, regional warehouses, and retail depots forms the backbone of supply chain operations. However, tax officers conducting roadside vehicle checks frequently detain consignments due to mismatched document types, wrong portal sub-type classifications, or omitted e-way bills. Understanding the statutory divide between single-GSTIN movements and distinct-person transfers prevents vehicle impoundment under Section 129. For related logistics scenarios, explore our guide on e-way bill bill to ship to rules, and review transit validity extensions in our guide on e-way bill expiry extension under Rule 138.
Statutory distinction: same GSTIN vs distinct persons
GST law draws an uncompromising boundary between internal movements within a single registration and movements across separate registrations:
- Intra-State transfers under the same GSTIN: Moving stock from a factory to a warehouse located within the same State where both locations are declared as principal or additional places of business under one GSTIN is not a supply. Because there is no independent taxable person and no consideration, no tax liability arises.
- Inter-State transfers between distinct persons: Under Section 25(4) of the Central Goods and Services Tax Act, separate registrations held by the same person in different States or within the same State are treated as distinct persons. Under Entry 2 of Schedule I, the supply of goods between distinct persons made in the course or furtherance of business constitutes a taxable supply even when made without consideration. The statutory rules are detailed on the official portal at Rule 138, CGST Rules.
Further procedural instructions and e-way bill generation parameters are maintained by the GSTN on the GSTN Tutorial Portal and the national portal at the GST Common Portal.
Deemed supply rule: Because inter-State branch transfers represent deemed supplies under Schedule I, the transferring branch must charge Integrated GST (IGST) on a tax invoice, which the receiving branch avails as input tax credit in its Form GSTR-3B.
Documentation requirements: delivery challan vs tax invoice
Choosing the correct transport documentation determines the legality of the consignment:
- Delivery challan under Rule 55: For intra-State transfers between branches or godowns registered under the same GSTIN, the sender must issue a serially numbered delivery challan containing the date and number of the challan, name, address and GSTIN of the consigner, place of supply, description of goods, HSN code, quantity, taxable value, and signature of the consigner.
- Tax invoice under Section 31 and Rule 46: For stock transfers between distinct GSTINs (whether inter-State or intra-State separate registrations), the transferor must issue a standard tax invoice containing all mandatory particulars, including invoice serial number, GSTIN of both branches, place of supply, HSN codes, and applicable IGST rate and amount.
Costly documentation error: Issuing a delivery challan for an inter-State branch transfer. Road interception squads treat this as transporting taxable goods without a valid tax invoice, triggering detention under Section 129 with a mandatory 200 percent penalty on the applicable tax.
E-Way bill portal generation rules and sub-types
Under Rule 138, every registered person who causes movement of goods of consignment value exceeding ₹50,000 must generate an e-way bill on the NIC portal (ewaybillgst.gov.in) before dispatch. When creating the e-way bill, selecting the correct transaction sub-type is essential:
- For inter-State stock transfers (distinct GSTINs): Select Outward as the supply type and Supply as the sub-type. Enter Document Type as Tax Invoice. Enter your branch GSTIN as the recipient. The portal validates the tax invoice details against e-invoicing databases where applicable.
- For intra-State stock transfers (same GSTIN): Select Outward as the supply type and Others or Line Item Transfer as the sub-type. Enter Document Type as Delivery Challan. Because the consigner and recipient GSTINs are identical, the system requires you to enter the specific dispatch and shipping addresses matching your portal registration.
Valuation rules for branch transfers under Rule 28
Determining the taxable value on an inter-unit tax invoice between distinct persons follows Rule 28 of the CGST Rules. The rule provides three sequential valuation mechanisms:
- Open market value: The value shall be the open market value of such goods.
- Goods of like kind and quality: If open market value is not available, the value of goods of like kind and quality.
- Cost-plus method: If value cannot be determined under earlier methods, value shall be cost of production plus 10 percent markup under Rule 30.
Crucially, the second proviso to Rule 28 provides an immense practical simplification for corporate accounting: where the recipient branch is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods. Taxpayers can adopt invoice values based on standard manufacturing cost without triggering valuation disputes, provided the recipient unit consumes the stock for taxable business activities.
Worked case study: factory to regional warehouse stock transfer
Consider Precision Tooling India Private Limited, operating a manufacturing plant in Sriperumbudur, Tamil Nadu (GSTIN: 33AAACP1111A1Z1). The company transfers industrial machinery parts to its central distribution depot in Bengaluru, Karnataka (GSTIN: 29AAACP1111A1Z9).
| Transfer Parameter | Intra-State Depot (Chennai) | Inter-State Depot (Bengaluru) | Compliance Standard |
|---|---|---|---|
| Relationship | Same GSTIN (33AAACP1111A1Z1) | Distinct person (29AAACP1111A1Z9) | Section 25(4) of CGST Act |
| Primary document | Delivery Challan (DC-0891) | Tax Invoice (INV-ST-0412) | Rule 55 vs Section 31/Rule 46 |
| Taxable valuation | ₹14,50,000 (stock value) | ₹14,50,000 (declared value) | Rule 28 second proviso |
| IGST charged (18%) | ₹0 (not a supply) | ₹2,61,000 (charged and paid) | Schedule I Entry 2 deemed supply |
| E-way bill sub-type | Outward - Others / Challan | Outward - Supply / Tax Invoice | NIC e-way bill portal standards |
| Return reporting | Not in GSTR-1 Table 4A | Reported in GSTR-1 Table 4A | Auto-populates into Karnataka 2B |
For the Bengaluru consignment, the Tamil Nadu plant issued tax invoice INV-ST-0412 with ₹2,61,000 IGST and generated e-way bill number 241089201945. The driver carried the physical invoice and e-way bill. In monthly returns, Tamil Nadu reported the invoice in Table 4A of Form GSTR-1, discharging liability in Form GSTR-3B. The Bengaluru depot availed ₹2,61,000 input tax credit after matching the invoice in Form GSTR-2B, ensuring complete statutory compliance with zero cash leakage.
Related guides
- E-way bill for sale on approval basis with delivery challan
- E-way bill for equipment and machinery moving for site work
- E-way bill validity calculation for over dimensional cargo under Rule 138
- E-way bill detention under Section 129: bank guarantee and Form GST MOV-08
- E-way bill for goods sent for job work and Form GST ITC-04 reconciliation
Frequently asked questions
Is an e-way bill required for stock transfer between branches located in the same State?
Yes, if the consignment value exceeds the applicable statutory threshold (Rs 50,000 under Central Rule 138, subject to specific higher State notifications). Intra-State transfers operating under the same GSTIN move under a delivery challan issued under Rule 55, with the e-way bill sub-type selected as Outward - Others.
What document is required when transferring stock to a branch in another State?
Transfers to branches in another State involve distinct persons under Section 25(4) of the CGST Act. Under Schedule I Entry 2, this movement constitutes a deemed taxable supply. The sender must issue a regular tax invoice under Section 31 and Rule 46, charging Integrated GST (IGST).
How is the value of goods determined for inter-State branch transfers?
Valuation follows Rule 28 of the CGST Rules. Under the second proviso to Rule 28, where the recipient branch is eligible for full input tax credit, whatever value is declared in the tax invoice is deemed to be the open market value of the goods.
Which transaction sub-type should be chosen on the e-way bill portal for stock transfers?
For inter-State stock transfers between distinct GSTINs accompanied by a tax invoice, select Supply as the transaction sub-type. For intra-State transfers under the same GSTIN accompanied by a delivery challan, select Outward - Others or Line Item Transfer.
Reconcile branch transfers across distinct GSTINs
When stock transfers cross State lines, receiving branches must match supplier invoices against Form GSTR-2B to safeguard input tax credit. Reconcile high-volume internal transfers directly in your browser. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 18 October 2026. Sources: Rule 138, CGST Rules, GSTN Tutorial Portal, GST Common Portal.