The Gujarat High Court has quashed a GST demand under section 74 against the Gujarat Co-operative Milk Marketing Federation (Amul) for not cross-charging corporate expenses from its head office to branches. Relying on CBIC Circulars 199/11/2023 and 210/4/2024 and the Delhi High Court in Metal One, it held that where branches are eligible for full ITC and no invoice is issued, the value is deemed Nil.
Case at a glance
| Case | Gujarat Co-operative Milk Marketing Federation Ltd. v. Union of India & Ors. |
| Forum | Gujarat High Court (Justice A.S. Supehia and Justice Vaibhavi D. Nanavati) |
| Impugned | Order-in-Original No. 74/CGST/(Ahmedabad South)/ADC/PBM/24-25 dated 01.01.2025 |
| Period | July 2017 to March 2019 |
| Key provisions | Rule 28 CGST Rules; Circulars 199/11/2023 and 210/4/2024; Section 74 |
| Result | Order quashed |
Facts of the case
Amul's head office at Anand, registered as an Input Service Distributor, incurs corporate expenses such as advertising, IT, SAP and legal fees used by branches and depots, which hold a common registration.
After a DGGI inquiry, the department alleged that the head office should have cross-charged these services to branches and confirmed a demand under section 74 on a proportionate basis.
Issue before the High Court
Is GST payable on unbilled head office services to branches when branches are eligible for full ITC, and was section 74 rightly invoked?
What the High Court held
- Under Circular 199/11/2023 and Circular 210/4/2024, where the recipient branch is eligible for full ITC and no invoice is issued, the value of the service may be deemed Nil, which is the open market value under the second proviso to Rule 28(1). The Delhi High Court in Metal One reached the same view.
- As no invoices were issued, the value is Nil and no tax arises. The department cannot value services proportionately to turnover merely because cross-charging was not done.
- Any tax paid would have been available as ITC to the branches; the matter was revenue neutral.
- For section 74, the only basis was that DGGI found the facts. Following Tata Steel v. Union of India (Supreme Court), foundational facts of fraud or suppression must be in the notice; mechanical recitals are not enough. The expenses were recorded in the books. The order was quashed.
Practical takeaways for taxpayers
- Businesses with branches in different states can rely on the 'Nil value' clarification where branches are entitled to full ITC.
- Where ITC at the branch is restricted (for example, exempt supplies), the position may differ; analyse each branch.
- Challenge section 74 where the only ground is that the investigation found the facts.
Frequently asked questions
Is GST payable on head office services to branches?
Technically yes, but where the branch can take full ITC and no invoice is issued, CBIC circulars allow the value to be treated as Nil.
Was section 74 applicable?
No. The Court held there was no evidence of fraud or suppression; the expenses were in the books and the issue was revenue neutral.
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This summary is based on the order of the Gujarat High Court in the special civil application filed by Gujarat Co-operative Milk Marketing Federation Ltd. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.