Multi-state manufacturing: taxable transfers to yourself, and the end of optional cross-charge

Short answer: your registrations are distinct persons, so moving goods between them is a taxable supply. And since 1 April 2025, credit on common input services must be distributed through an ISD registration — cross-charge is no longer an available substitute for that purpose.

Distinct persons

The idea that trips people up is simple and unintuitive: two GST registrations under one PAN are two persons.

A supply between distinct persons is taxable even without consideration. So a transfer of goods from your Karnataka plant to your Tamil Nadu warehouse is a supply, requiring a tax invoice and attracting tax, which the receiving registration generally takes as credit.

Over the chain it is usually cash-flow neutral. It is not, however, optional, and treating it as an internal paper movement produces a registration that has been supplying without invoicing.

Valuing the transfer

Valuation between distinct persons follows prescribed rules, with one relief that does most of the practical work: where the recipient is eligible for full input tax credit, the value declared in the invoice is accepted as the open market value.

That is what makes routine branch transfers administrable — you are not required to construct a market price for work-in-progress moving between your own plants.

The relief depends on full credit eligibility at the receiving end. A branch with exempt output, or with credit blocked for some other reason, falls outside it and the transfer has to be valued under the general rules. This is worth checking rather than assuming, because it is exactly the situation in which a business carries on declaring a nominal value.

The ISD change

This is the more consequential shift, and a lot of multi-state businesses have not acted on it.

Before 1 April 2025 there were two routes for getting credit on centrally procured costs out to the branches that used them:

• ISD — a separate registration receiving the invoices and distributing credit.
• Cross-charge — head office recovering the cost from branches as a supply of service, with tax charged and credit taken.

Practice varied enormously, and so did outcomes.

From 1 April 2025, distribution of credit on common input services through an ISD registration is mandatory. The choice is gone.

What each mechanism now does

They are no longer alternatives. They address different things, and a business needs to work out which of its central costs falls into which bucket.

Why getting it wrong is not self-correcting

The instinct is that if the group paid the right tax overall, the allocation between registrations is a technicality.

It is not, because each registration stands alone. Credit availed by the wrong registration is credit availed wrongly, whatever the group position. The registration that should have received it has under-claimed, and the one that did receive it has over-claimed — and only one of those is likely to be corrected in your favour.

The exposure also compounds quietly. Nothing in the monthly returns flags an allocation that should have gone through an ISD, so it accumulates from the date the requirement became mandatory until something prompts a review.

What to do

1. List every registration under the PAN.
2. Identify centrally procured third-party input services used by more than one registration — these are the ISD population.
3. Separate internally generated services — these stay with cross-charge.
4. If not already registered, obtain ISD registration and start distributing.
5. Quantify what was distributed by the wrong mechanism since 1 April 2025, and decide how to correct it.
6. Confirm branch transfers carry tax invoices and that the receiving branch is fully credit-eligible for the valuation relief to hold.

For how credit availability turns on what your suppliers actually filed, see input tax credit and GSTR-2B.

This is a working reference, not the statute. For anything you are relying on, confirm the section and rule text directly.