Namaste DOST!

Today, we’re diving into a practical GST ruling that simplifies two of the most confusing areas for small businesses —

👉 how to handle sales to related parties, and

👉 whether transportation services to unregistered persons attract GST.

Yes, you read that right — one ruling from Andhra Pradesh answered both questions, giving traders across India two big clarity wins under GST.

Summary

M/s Sri Lakshmi Ganesh Cement and Iron General Stores approached the Andhra Pradesh Authority for Advance Ruling (AAR) with three practical questions.

The business wanted to know:

1️⃣ How to determine the value of supply for sales to unrelated customers?

2️⃣ What value to consider when goods are sold to a related business entity?

3️⃣ Whether transport services to unregistered persons are taxable?

The Andhra Pradesh AAR (Order No. 04/AP/GST/2025, dated 8 July 2025) made it crystal clear:

✅ Unrelated party sales → Transaction value is sufficient.

✅ Related party sales → Invoice value is valid if the buyer can claim full ITC.

✅ Transport for unregistered persons → No GST if no consignment note is issued.

A ruling that every small trader, transporter, and family-run business should bookmark.

Facts of the Case

M/s Sri Lakshmi Ganesh Cement and Iron General Stores, located in East Godavari (Andhra Pradesh), operated in two business verticals:

1️⃣ Trading of Cement and Iron – selling to both registered and unregistered buyers, and

2️⃣ Transportation of Goods by Road – using its own tempo van for local deliveries, mostly to farmers and individuals.

The twist?

The firm also sold goods to M/s Sri Lakshmi Ganesh Steels — a proprietorship owned by the applicant’s wife.

That made the buyer a related person under GST (since they were family members).

The applicant also provided transport services but did not issue consignment notes — only simple bills — and wanted to know whether such transport activity was taxable under GST.

Legal Issue

The Authority examined three specific questions:

1️⃣ What is the value of supply for unrelated party transactions under Section 15(1) of the CGST Act?

2️⃣ How should valuation work for related persons eligible for full ITC under Rule 28?

3️⃣ Whether transportation of goods without a consignment note to unregistered customers attracts GST, and which notification applies — 12/2017 or 32/2017?

Arguments Presented

The applicant, represented by a Chartered Accountant, submitted that:

• Under Section 15(1), where parties are not related and price is the sole consideration, the transaction value is the taxable value.

• Under Rule 28, if the recipient is a related person but entitled to full input tax credit, the invoice value itself is deemed to be the open market value.

• Since the applicant did not issue consignment notes, he did not qualify as a Goods Transport Agency (GTA); hence, his transport services to unregistered customers should be exempt under Notification No. 32/2017.

⚖️ Court’s Decision

1️⃣ Supplies to Unrelated Persons

The AAR reaffirmed that Section 15(1) governs such transactions.

When the supplier and recipient are unrelated and the price is the sole consideration, the transaction value — the price actually paid or payable — shall be the value of supply.

In other words: No complications, no adjustments. The invoice price itself stands.

2️⃣ Supplies to Related Persons

Here, the AAR referred to Rule 28 of the CGST Rules, 2017, which prescribes valuation for transactions between related or distinct persons.

Ordinarily, valuation is based on open market value, but the second proviso to Rule 28(1) simplifies the situation:

“Where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value.”

Thus, for related party transactions — such as between husband and wife’s businesses — if the buyer can avail full ITC, the invoice value itself is sufficient for GST compliance.

No need to revalue the goods. No need to worry about market comparison.

3️⃣ Transport Services to Unregistered Persons

The AAR examined the definition of a Goods Transport Agency (GTA) as given in Notification No. 12/2017 – Central Tax (Rate).

A GTA is someone who provides transport services and issues a consignment note.

Since the applicant did not issue any consignment notes, he was not a GTA.

Therefore, as per Sl. No. 21A of Notification No. 32/2017 – Central Tax (Rate), the transport services provided to unregistered persons were exempt from GST.

Simple rule: No consignment note, no GST.

Legal Reasoning & Analysis

This ruling elegantly connects valuation and classification — two areas where many taxpayers struggle.

• For unrelated transactions: Section 15(1) trusts the declared price when parties deal independently and without manipulation.

• For related transactions: Rule 28 ensures transparency while preventing revenue leakage, but also provides relief when full ITC is available — recognizing that the government isn’t losing revenue.

• For transporters: The distinction between a transporter and a GTA lies purely in documentation. Issuing a consignment note shifts ownership risk and creates liability; without it, the transporter remains exempt.

The message is clear — document right, declare right, and the law will protect you.

Practical Takeaways for Business Owners

✅ 1. Transaction value = True value for independent deals.

If both sides are unrelated and price is fair, GST sees your invoice as final.

✅ 2. Related parties can rely on invoice value (if full ITC available).

Family-run firms or sister concerns can transact confidently — invoice value will stand.

✅ 3. Not all transporters are GTAs.

If you don’t issue consignment notes, your services to unregistered persons remain exempt.

✅ 4. Master your notifications.

Notification Nos. 12/2017 and 32/2017 govern most transport cases — know which one applies.

✅ 5. Keep clean records.

Maintain clarity between trading and transport business activities; it prevents confusion during audits.

Why This Matters

This AAR ruling reinforces that GST law rewards clarity and compliance.

For small traders and family businesses, it’s a reassurance —

that if transactions are genuine, invoices transparent, and documentation proper, the system supports you.

It also reflects a balanced approach: where tax policy encourages business logic over bureaucracy.

Conclusion

One ruling — two clear wins.

Whether it’s a related party sale or a transport service to unregistered customers, this case from Andhra Pradesh proves that simplicity and honesty still work under GST.

So, if you’re a trader, manufacturer, or small transporter — remember this golden rule:

“Transparency in invoices is your best tax defence.”

Because at GST DOST, we always say —

Knowledge se banta hai trust, aur trust se banti है clarity.

“📞 Need help with similar GST valuation or transportation issues?
Contact GST DOST for expert guidance and personalized support.

FAQ

Q1. What was the dispute about?

A: The ruling clarified valuation under Section 15 for related and unrelated parties, and GST liability on transport services to unregistered persons.

Q2. What did the AAR decide for related party transactions?

A: The invoice value is accepted as the value of supply if the recipient is eligible for full ITC.

Q3. Is GST applicable on road transport services without a consignment note?

A: No. Such services are exempt under Notification No. 32/2017, as the provider is not a GTA.

Q4. How does Section 15(1) simplify valuation?

A: For unrelated parties with price as the only consideration, the transaction value itself is the taxable value.

Q5. Will GST apply to road transport services provided to a farmer or an individual?

Answer: No. If the transporter has not issued a consignment note, such service is exempt from GST under Notification No. 32/2017.

References

• Case Citation: M/s Sri Lakshmi Ganesh Cement and Iron General Stores – Andhra Pradesh AAR, AAR No. 04/AP/GST/2025, dated 8 July 2025.

• Key Legal Provisions:

  • Section 15, CGST Act, 2017 – Valuation of supply

  • Rule 28, CGST Rules, 2017 – Valuation between related or distinct persons

  • Notification No. 12/2017 – Central Tax (Rate), 28 June 2017

  • Notification No. 32/2017 – Central Tax (Rate), 13 October 2017

• Bench: K. Ravi Sankar & B. Lakshmi Narayana, Authority for Advance Ruling, Andhra Pradesh

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