When you move stock from your GSTIN in one state to a marketplace fulfilment centre in another state, GST treats it as a supply between distinct persons, even though no sale happens. You need a registration covering the FC's state, a tax invoice (or the document your adviser confirms) with IGST at the applicable rate, an e-way bill where required, and ITC tracking in the receiving GSTIN. Confirm current rules with your tax adviser.
Why moving stock to another state's FC attracts GST
A fulfilment centre (FC) is only a storage location, but GST looks at registrations, not warehouses. Establishments of the same person registered in different states are treated as distinct persons under Section 25 of the CGST Act, and Schedule I treats supplies between distinct persons as supply even without consideration. Please verify the current wording of both provisions.
So moving goods from your Haryana GSTIN to an FC covered by your Karnataka GSTIN is generally an inter-state supply, taxed as IGST, even though no customer has bought anything yet. Moving stock between locations under the same GSTIN within one state is different, because there is no distinct-person supply.
Step 1: Get registrations right before dispatch
Most transfer problems begin before the truck leaves. Check the following first:
- Your marketplace seller agreement and onboarding checklist, which state whether you need registration in each state where stock is held.
- Whether the FC state requires a new registration or whether the FC can be added as an additional place of business to an existing registration in that state.
- That the FC address appears on the registration of the receiving state. A mismatch causes e-way bill and ITC trouble later.
- A maintained master list of FC, state, GSTIN and categories of goods stocked.
Registration rules for e-commerce sellers and their exemptions change over time. Confirm the latest position with your tax adviser or the GST portal.
Step 2: Raise the right document and value the stock
For each inter-state transfer, settle these points with your adviser and apply them consistently:
- Document: normally a tax invoice from the sending GSTIN to your receiving GSTIN. Confirm whether any delivery challan route applies to your case.
- Rate: IGST at the rate for the HSN of the goods. Take it from the current rate notification or your adviser, not from last year's invoice.
- Value: related and distinct-person supplies are valued under Rule 28 of the CGST Rules. Check which basis applies to you.
- E-way bill: check current value thresholds and exemptions before dispatch.
Record the invoice number, e-way bill number and the marketplace's inbound reference (ASN or shipment ID) for every consignment. You will need them for reconciliation.
Step 3: Track ITC and returns state by state
The sending GSTIN reports the transfer as an outward supply in GSTR-1 and pays IGST from available credit or cash. The receiving GSTIN sees it in GSTR-2B and can claim ITC in GSTR-3B, subject to the usual conditions.
The cash-flow effect matters. IGST paid on a transfer sits as credit in the destination state until sales there, or other liabilities, use it. If you send a lot of stock to a state with slow sales, credit piles up while you pay tax elsewhere. Check the current rules on the order in which IGST credit is utilised.
- Maintain a state-wise ITC balance after every filing.
- Compare transfer invoices in your books with GSTR-2B of the receiving GSTIN.
- Use sell-through data by state to decide the next allocation.
Step 4: Handle sales, returns and TCS from each FC
When a customer orders, the sale is made from the GSTIN of the state where the FC stands. The place of supply is the delivery location. If it is in the same state, CGST and SGST apply, and otherwise IGST applies.
Marketplaces collect TCS under Section 52 of the CGST Act. Check the current rate and conditions in the official notification and in your settlement reports, and see that the TCS is shown against the right GSTIN.
- Customer returns and RTOs: issue credit notes as required, and note which FC receives the returned stock.
- Lost or damaged units at the FC: check the ITC treatment with your adviser and the reimbursement terms in your agreement.
Reconcile transfers, stock and settlements every month
A monthly routine catches most errors:
- Match each transfer invoice to the FC's inbound receipt quantity.
- Compare closing stock by FC with the marketplace inventory report and your books.
- Match GSTR-1 sales to marketplace sales reports, GSTIN by GSTIN.
- Match TCS in settlement reports with the credit shown on the GST portal.
- Review ITC balances by state and adjust the next transfers.
Doing this in spreadsheets gets heavy across states. MarketplaceMetrics by Fundle reconciles marketplace sales and settlements and checks fees against agreed terms. Myntra Excel reports are reviewed today, and other marketplaces are a scope discussion.
Worked example
Illustrative example only. The figures and the 5% rate below are assumptions for demonstration. They are not the rate for your goods.
- You transfer 500 units from your Haryana GSTIN to an FC under your Karnataka GSTIN, valued at ₹800 per unit, so the taxable value is ₹4,00,000.
- At an assumed IGST rate of 5%, IGST on the transfer is ₹20,000. This becomes ITC in the Karnataka GSTIN, subject to conditions.
- 200 units then sell to Karnataka customers at ₹1,000 each, giving a taxable value of ₹2,00,000. At the same assumed 5%, output tax is ₹10,000 (₹5,000 CGST and ₹5,000 SGST).
- The ₹20,000 credit covers the ₹10,000 liability, and about ₹10,000 stays as unused credit in Karnataka until more sales happen. Meanwhile, Haryana's own liability still needs to be funded.
Tracking this per GSTIN shows how much working capital is locked in tax credit.
Questions and answers
Is a stock transfer to a marketplace FC in another state a sale?
No customer sale takes place, but GST treats a movement between your own GSTINs in different states as a supply between distinct persons. It is generally taxed as IGST. Ownership of the goods does not change, and the marketplace only stores them.
Do I need a GST registration in every state where an FC holds my stock?
Generally you need registration, or an additional place of business, covering each state where you store stock. Your marketplace agreement may add its own requirements. Rules and exemptions can change, so confirm the current position with your tax adviser.
Who claims ITC on the IGST paid for the transfer?
The receiving GSTIN, meaning your registration in the FC's state, can claim ITC when the transfer invoice appears in its GSTR-2B and the usual conditions are met. The sending GSTIN reports the supply in GSTR-1 and pays the IGST.
Do I need an e-way bill for moving stock to an FC?
Inter-state consignments often need an e-way bill, depending on current value thresholds, the nature of goods and exemptions. Check the latest e-way bill rules on the official portal or with your adviser before every dispatch.