GST Input Tax Credit on Railway Freight for Stock Transfers
The Authority for Advance Ruling decided that moving non-taxable goods between company units is a stock transfer, not an export, blocking input tax credit.
- Ruling
- 17/WBAAR/2018-19 dated 18.09.2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Indian Oil Corporation asked if freight GST on petroleum transfers is claimable.
- The authority ruled these movements are stock transfers, not exports.
- Input tax credit on railway freight is denied for these transfers.
- Non-taxable goods moved internally do not qualify as zero-rated supplies.
In short
The company asked if they could claim Input Tax Credit (ITC) on GST paid for railway freight when moving petroleum products from a refinery to their own warehouse. They argued this was an export transaction, but the tax authority disagreed because the goods were not yet exported to a foreign country.
What has changed
How it worked before
Businesses often assumed that moving goods to an export-oriented warehouse could be treated as an export, allowing them to claim credit for the taxes paid on the transport.
What has changed
The authority ruled that moving goods between your own units is a stock transfer, not an export. Because the goods are non-taxable and the movement is not an export, you cannot claim input tax credit on the freight costs associated with these transfers.
Who this affects
Businesses that move non-taxable goods between their own branches or warehouses, especially those intending to export the goods later.
An example
A chemical manufacturer moves non-taxable products from their factory in Gujarat to their own warehouse in Maharashtra. They pay GST on the transport and want to claim it as input tax credit. Based on this ruling, the tax officer would likely deny the credit because the movement is a stock transfer, not an export.
What you should do
Do not assume you can claim input tax credit on freight for internal stock transfers of non-taxable goods. This ruling only binds the company that asked; if you are in a similar position, consult your tax advisor to see if your specific documentation supports an export claim.
If you do nothing
If you claim input tax credit on these transfers and the tax department disagrees, they may issue a demand notice for the tax amount plus interest and penalties. Relying on a ruling that does not apply to your specific facts can lead to costly litigation and financial loss.
The terms explained
- Input Tax Credit
- The tax a business pays on its purchases or services that it can use to reduce the tax it owes on its own sales.
- Stock Transfer
- Moving goods from one branch or unit of a company to another unit of the same company.
- Zero-rated supply
- A supply of goods or services that is taxed at a zero percent rate, allowing the business to claim back the tax paid on inputs used to create it.
The ruling in detail
Authority for Advance Ruling
Indian Oil Corporation Ltd
17/WBAAR/2018-19 dated 18.09.2018 · West Bengal
Questions before the authority
- Whether or not GST paid on the railway freight for transportation of HSD, Motor Spirit (petrol), and Aviation Turbine Fuel (ATF) from the Haldia Refinery to the export warehouse at Raxaul can be availed as Input Tax Credit under the GST Act.
Facts
The applicant transports non-taxable petroleum products from its refinery in West Bengal to its own warehouse in Bihar for subsequent export to Nepal. The applicant treats this movement as an export transaction and seeks to claim Input Tax Credit on the GST paid for railway freight. The tax authorities contend that this is a stock transfer between distinct persons and not an export, thereby denying the credit.
Ruling
| Question | What the authority ruled |
|---|---|
| Input Tax Credit on railway freight | Denied The transfer is a non-taxable supply between distinct persons, not an export. |
The Authority ruled that the movement of goods from the West Bengal unit to the Bihar unit is not an export but a stock transfer between distinct persons. Consequently, the applicant is not entitled to claim Input Tax Credit on the GST paid for the railway freight. The supplies are classified as non-taxable supplies rather than zero-rated supplies.
Reasoning
The Authority determined that the movement of goods to the Raxaul warehouse is not **inextricably linked** to an export order, as the goods could be diverted for home consumption. Under Section 25(4) of the GST Act, the units are distinct persons, and the transfer constitutes a non-taxable supply. Because the movement does not qualify as an export under Section 2(5) of the IGST Act, the provisions of Section 16(1)(a) and 16(2) regarding zero-rated supplies are inapplicable. The Authority relied on the definition of non-taxable supplies under Section 2(78) and the classification of exempt supplies under Section 2(47) of the GST Act.
Provisions relied on
- Section 9(2) of the GST Act
- Section 16(1)(a) of the IGST Act
- Section 16(2) of the IGST Act
- Section 25(4) of the GST Act
- Section 2(5) of the IGST Act
- Section 2(78) of the GST Act
- Section 2(47) of the GST Act
- Section 5 of the CST Act
- Circular No. 581/18/2001-CX
For the practitioner
This ruling clarifies that internal stock transfers of non-taxable goods to an export warehouse do not automatically qualify as zero-rated exports for the purpose of claiming Input Tax Credit. It emphasizes that the **actual export** must be evidenced by documentation like ARE-1 endorsed by Customs, rather than mere re-warehousing. Practitioners should note that this decision limits the ability to claim credit on input services for goods that remain under the control of the entity within India.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/wb_17_2018-19_dt_18.09.18_iob.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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