Summary: Under GST, ‘consideration’ refers to any payment made, in money or otherwise, for the supply of goods or services, and includes the value of any act or forbearance. However, government subsidies and refundable deposits are not considered as payment unless the deposit is adjusted against the supply. Certain items, like returnable packing material and free supplies made by the recipient, are not included in the value for GST purposes. Additionally, the GST treatment of donations, charity collections, and the cost of free diesel provided for goods transport has been clarified. If a recipient is eligible for full Input Tax Credit (ITC), the price declared in invoices to related persons is accepted as the open market value. In cases where the consideration is not fully in money, the value of the supply must be determined by either the open market value or the sum total of money consideration. If these are not determinable, similar goods or services of like kind and quality are used for valuation. For currency exchange, the rate of exchange at the time of supply is used to determine the taxable value. These guidelines ensure that the correct value for goods and services is declared under GST, helping businesses comply with the tax rules.
Meaning of ‘Consideration’
‘Consideration’ in relation to supply of goods and services or both to any person, includes
Any payment made or to be made, whether in money or otherwise and the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by said person or by any other person; but shall not include and subsidy given by Central or State Government.
Deposit is not consideration
A deposit whether refundable or not, given in respect of the supply of goods or services or both shall not be considered as payment made for the supply unless the supplier applies the deposit as consideration for the supply – proviso to sec-2(31) of CGST Act.
GST will be payable only when such deposit is adjust against supply.
Returnable packing material
When goods are packed in returnable packaging, like gas cylinder, drums etc.
It is not required to add amortised cost of durable and returnable packing.
Free supplies made by recipient and amortized cost of patterns, tools, dies etc. are not includible in value for GST
As regards addition of amortised cost of tools and died supplies by principal manufacturer (OEM i.e. Original Equipment Manufacturer) to supplier of components, it has been clarified as follows
- The manufacturer who has supplied the tools and dies on Free of Cost (FOC) basis not required to reverse the ITC on such moulds and dies.
- The component manufacturer is not required to add amortised cost of tools and dies in the value of component supplied by him to the principal manufacturer.
- However, if the contract was that the component manufacturer will himself manufacture and use tools and dies but are supplied by OEM, then OEM has to reverse the ITC and amortised cost of tools and dies is required to be added in value of component supplied by manufacturer of components.
Charity (Dharamada) is not includible in value
In DJ Malpaniv. CCE [2018] 106 Taxmann.com 29=336 ELT 385(SC 3-member branch), assesses was collecting dharamda (charity) separately in invoice. It was voluntary on purchases.
Dharamda is not includible in assessable value, as it is not consideration for sale.
Value of goods transport service to include diesel supplied free by customer?
Cost of free diesel is includible in value of goods transport service, as diesel is important and integral part of business process of transport of goods.
Donation without instruction not subject to GST
Donation without any instruction for its use are not subject to GST. However, where donor is receiving benefit in terms of advertisement or publicity, it is taxable under GST.
Price to related person acceptable if the recipient is eligible for entire ITC
Even if the supply is not related person, if the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services-proviso to rule 28 of CGST and SGST Rules.
Rate of exchange of currency for determination of value
Rate of exchange of value of taxable goods- The rate of exchange for determination of value of taxable goods shall be the applicable rate of exchange notified in CBE&C under section 14 of CGST Act as on date of supply of such goods.
Determination of value when value not ascertained
The value of supply of goods or services or both which can’t be valued under sec15(1) of CGST and SGST Act, shall be determined as per rule- sec15(4) of CGST Act.
Such valuation may be required in following situation-
- The consideration, whether paid or payable, is not money, wholly or partly.
- The supplier and the recipient of the supply are related.
Value of supply of goods or services where the consideration is not wholly in money
The supply of goods or services is for a consideration not wholly in money, the value of the supply shall be as follow- Rule 27 of CGST and SGST Rules, 2017
- The open market value of such supply
- If open market value is not available, the sum total of consideration in money and any such further amt. in money as is equivalent to the consideration not in money if such amt is known at time of supply
- If the value of supply is not determinable under clause (a) or clause (b), the value of supply of goods or services or both of like kind and quality
- If value is not determinable under clause (a) or clause (b) or clause (c), the sum total of consideration in money and such further amt. in money that is equivalent to consideration not in money as determined by rule 30 or 31 of CGST and SGST Rules, 2017, in that order.
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