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Section 15: Value of Supply:

  • When the Supplier and Recipient are not related &
  • The price is the sole consideration for the supply, then

Transaction value = the price paid or payable for the supply of goods/services/both.

 +

In addition to above, “Value Supply” includes:

= Taxes, duties, cess, fees and charges levied under any law for the time being in force, if charged
separately by the supplier. (other than CGST, SGST, IGST, compensation cess); +

= amount payable by the Supplier, but the same is incurred by the Receiver. If this amount is not
included in the price of the goods; +

= incidental expenses charged by the supplier to the recipient; +

= interest or late fee or penalty – for delayed payment of any consideration of any supply; +

= subsidies directly linked to the price (other than subsidies provided by C.Govt./S.Govt.)

If unable to determine value as per the above, the same shall be determined in such manner as may be prescribed; (i.e. need to study Valuation Rules).

 Rule 27: Value of supply of goods or services

  • where the consideration is not wholly in money:

a) Open Market Value;

Example: Where a new phone is supplied for 20K rupees along with the exchange of an old phone and if the price of the new phone without exchange is 24K rupees, the open market value of the new phone is 24K.

b) If above (a) is not possible, i.e. Open Market Value is not available,

=Consideration in Money + Money, equivalent of consideration not in money;

Example: Where a laptop is supplied for 40K rupees along with the barter of a printer that is manufactured by the recipient and the value of the printer known at the time of supply is rupees 4K but the open market value of the laptop is not known, the value of the supply of the laptop is 44K rupees.

c) If above (a) & (b) both not possible,

= value of supply is like kind & quality; (i.e. comparison method)

d) If above (a) &(b) &(c) are not possible,

= Consideration in Money +

= Money, equivalent of consideration not in money, as determined by Rule 30 / 31.

Rule 28: Value of supply of goods or services

  • between distinct persons (or) related person (excluding agents)

(a) Open Market Value;

(b) If Open Market Value is not possible,

     = value of supply is like kind & quality;

(c) If above (a) &(b) are not possible,

     = Consideration in Money +

     = Money, equivalent of consideration not in money, as determined by Rule 30 / 31.

xxx

 Where the recipient is eligible for full input tax credit, then open market value = the value declared in the invoice.

Rule 29: Value of supply of goods or services received through an Agent

(a) Open Market Value; or

  • 90% of the price charged by the Agent when suppling to third person;

xxx

Illustration:

A principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and quality in subsequent supplies at a price of 5000 rupees per quintal on the day of the supply.  

Another independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of 4550 rupees per quintal.  

The value of the supply made by the principal shall be:

= 4550 per quintal (i.e. open market value of goods) (or)

= where he exercises the option, the value shall be 90per cent. of 5000 rupees i.e.,4500.

(b): If above (a) is not possible, value of supply is = as determined by Rule 30 / 31.

Rule 30: Value of supply of goods or services or both based on “cost”: (computed method)

Where the value of goods/services is unable to determine as per above all methods, then

Value of supply = 110% of the cost of production;
= 110% of the cost of acquisition;
=110% of the cost of provision of services  

Rule 31: Residual Method:

Value of supply is determined using

⇒ reasonable means consistent with the principles; and

⇒the general provisions of Section 15; and

⇒the provisions of this Chapter;

Rule 32: Value of supply in relation to certain supplies:

a) Money Changer Services:

Value of services = [selling / buying rate] – [the RBI reference rate] * total units of currency.

If RBI reference rate is not available, Value of services = 1% of gross amount of INR.

If neither of the currencies exchanged in Indian rupees (INR) then, 

Value of supply = 1% [ RBI reference rate * total units of one foreign currency] (or)
= 1% [ RBI reference rate * total units of one foreign currency], whichever is lower

At the option of the supplier, value of supply

= 1% of the gross amount of currency exchanged up to 1 lakh (or) min: INR 250

= INR 1000 + 0.5% of the gross amount currency exchanged 1 to 10 lakh.

= INR 5500+ 0.1% of the gross amount currency exchanged > 10 lakh (or) max: 60K INR 

b) Booking of ticket for Air travel:

Value of Supply = 5% of Basic fare (domestic);
=10% of Basic fare (International travel)

c) Life Insurance Business:

a) Value of supply

= [Gross premium collected] – [amount allocated for Investment, out of premium amount]

b) in case of Singe Premium annuity plan, other than (a) above:

Value of supply = 10% of the single premium collected from the Policy holder.

c) In all other cases (i.e. other than (a) &(b) above):

Value of supply = 25.00% of the premium collected in 1st year;

=12.50% of from next year onwards;

d) When the whole premium is for life risk cover, then value of supply is NIL (Term policy)

d) Person buying and selling – Second hand goods: 

Value of supply = Selling price – Purchase price

e) Goods sold on hire-purchase basis, but recovered, due to non-payment of installment:

Value of supply

 = [Purchase price of such goods to defaulting borrower]

 = 5% points for every quarter/ part thereof between date of purchase and date of disposal. 

f) Value of redeemable -Token / Voucher/Coupon/Stamp (other than postal stamp):

Value of supply= Money value of redeemable token/voucher/coupon/ stamp;

g) Value of taxable services provided by such class of notified service providers:

(as referred in paragraph 2 of Schedule 1 of the CGST Act)

Where input tax credit is available, then value of supply = NIL

 Para 2 of Schedule 1 of CGST:

“Supply of goods or services or both between related persons (or) between distinct persons [as specified in section 25], when made in the course or furtherance of business.”

Rule 33: Value of Supply in case of pure agent: = Value of supply is NIL

Illustration:

Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B.

Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies.

The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B.

Conclusion:

A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B. 

Rule 34: Rate of exchange of currency, other than Indian rupees, for determination of value (Example: Export supply of goods/ services):

Value of supply = RBI reference rate on the date of time of supply – Section 12 / Section 13 

Rule 35: Value is inclusive of CGST+SGST/IGST /UTGST:

Tax amount =

[Value inclusive of taxes] X [tax rate in %]
     100 + sum of tax rates, in %6

Author Bio

Name: VIjay
Qualification: CA in Job / Business
Company: IME
Location: hyderabad, Andhra Pradesh, IN
Member Since: 28 Jun 2017 | Total Posts: 3

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One response to “GST Valuation of Supply and its Rules – simplified”

  1. Tarun says:

    Hello Sir,
    Old gold jewellery Conversion in bullion under the law of GST ?
    What is Rules ?

    Regards,

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