A recent Gujarat High Court judgment involving the Gujarat Cooperative Milk Marketing Federation, which markets Amul products, has brought an important GST compliance issue into focus: how should businesses treat common expenses incurred by a head office for its branches?

The court quashed a GST demand of approximately ₹43.43 crore relating to expenses such as advertising, legal services and IT systems. The dispute concerned expenses incurred between July 2017 and March 2019 that had not been cross-charged to branches and depots holding separate GST registrations.

For businesses operating through multiple branches, subsidiaries or GST registrations, the judgment highlights why understanding inter-branch transactions, maintaining proper accounting records and applying GST valuation rules correctly are essential.

What Was the GST Dispute About?

The GST department argued that Amul's head office had incurred expenses for branches and depots that were separately registered under GST. According to the department, these internal services were taxable and should have been accounted for through cross-charging, a process under which one registered unit invoices another for services provided or expenses shared.

The department confirmed an Integrated GST demand of ₹43.43 crore, along with interest and penalty, in January 2025. Amul challenged the order, arguing that the expenses were recorded in its books and that the absence of cross-charging did not automatically establish tax evasion.

Why Did the Gujarat High Court Quash the Demand?

The court relied on applicable GST valuation rules and CBIC clarifications concerning services supplied between separately registered units of the same organisation.

As reported in The Indian Express on 16 October 2026, the court held that, in the circumstances of this case, the value of the relevant services was required to be treated as nil under Rule 28 of the CGST Rules because no tax invoices had been issued for those services. The court also rejected the department's approach of calculating taxable value simply by allocating common expenses proportionately among branches.

The judgment further questioned the invocation of Section 74, which deals with demands involving fraud, wilful misstatement or suppression of facts with intent to evade tax. The court noted that the expenses were reflected in Amul's books and financial records and that the necessary basis for alleging deliberate tax evasion had not been established.

The ruling was based on the facts and applicable legal provisions of this particular dispute. It should not be interpreted as a blanket exemption from GST on all head-office expenses or inter-branch services.

What Does This Mean for Other Businesses?

Businesses with multiple GST registrations should review how they record shared expenses, internal services and transactions between registered units. Expenses relating to advertising, IT support, legal services, management services and other common functions may require careful analysis under the applicable GST provisions.

A business should not assume that every shared expense automatically creates a tax liability, nor should it assume that no tax applies merely because the transaction is internal. The treatment depends on the nature of the supply, the relevant GST valuation rules, the availability of input tax credit and the facts of the transaction.

Maintaining consistent books of accounts, supporting invoices, expense-allocation records, inter-branch agreements and reconciliation statements can help businesses explain their accounting and tax positions during scrutiny or audit.

GST Compliance Lessons for Businesses

1. Review inter-branch transactions: Identify services and expenses shared between separately registered units and determine their correct GST treatment.

2. Maintain reliable documentation: Keep supporting records for common expenses, internal arrangements, accounting entries and any applicable invoices.

3. Reconcile books with GST returns: Review transactions reported in the books against relevant GST returns and tax ledgers to identify inconsistencies.

4. Evaluate the basis of a tax demand: When responding to a notice, examine the specific legal provision, valuation method, supporting evidence and reasons cited by the department.

5. Do not overlook audit readiness: Periodic reviews of GST records can help businesses identify potential issues before they develop into significant disputes.

Conclusion

The Amul GST judgment highlights the importance of applying GST valuation provisions correctly and examining the facts before treating internal expenses as taxable supplies. It also demonstrates why transparent accounting records and well-supported tax positions matter when a business faces scrutiny.

For businesses with multiple registrations, the practical takeaway is clear: review inter-branch arrangements, reconcile financial records and ensure that GST treatment is supported by the applicable law.

Disclaimer: This article is for general informational purposes and does not constitute legal or tax advice. The treatment of inter-branch transactions should be assessed on the facts of each case and the applicable GST provisions.