CA Aanchal Kapoor

FAFD, FCA, B.COM

Determination of value in respect of certain supplies Under GST Rule 6

6.Determination of value in respect of certain supplies

NON OBSTANTE & OPTIONAL CLAUSE.

(1) Notwithstanding anything contained in these rules, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter.

Views: This valuation rule relates to valuation of certain specific supplies particularly by taking power from Section 15 of CGST Act, 2017 and in this case the assessee has an option to opt to Rule 6 for valuation or he can resort to  normal transaction value, as he deems fit. i.e this rule overrules the other rules and is optional to be opted by the assessee.

SALE & PURCHASE OF FOREIGN CURRENCY

(2) The value of supply of services in relation to purchase or sale of foreign currency, including money changing, shall be determined by the supplier of service in the following manner:-

(a) For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency:

Provided that in case where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received by the person changing the money:

Provided further that in case where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the  two currencies into Indian Rupee on that day at the reference rate provided by RBI.

Provided also that a person supplying the services may exercise option to ascertain value in terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

Views: This valuation rule relates to Sale & Purchase of Foreign Currency including the money changing business, whether by banks or any other person. The concept is being explained with the help of following diagram along with examples/ case studies:

Currency

Rate Diff

Example 1

Value of Supply

Case Study

(b) At the option of supplier of services, the value in relation to supply of foreign currency, including money changing, shall be deemed to be

(i) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, subject to a minimum amount of two hundred and fifty rupees;

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(ii) one thousand rupees and half of a per cent. of the gross amount of currency exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees; and

(iii) five thousand and five hundred rupees and one tenth of a per cent. of the gross amount of currency exchanged for an amount exceeding ten lakh rupees, subject to maximum amount of sixty thousand rupees.

Views: In this case, if the assessee does not want to follow Rule 6(2)(a), he still has option to pay Tax on notional basis based on a following slab rates, which are simplified by way of the following diagram:

RULE.6(2)(b)

CONDITIONS

  • OPTIONAL
  • ONCE EXERCISED SHALL NOT BE WITHDRAWN DURING THAT F.Y.
  • Applicable for a F.Y.
PER TRANSACTION
Upto 1 Lac 1% of Gross Amt.

Min. = Rs. 250

Max. =Rs. 1000

1 Lac – 10 Lac 1000+ 1/2%(Gross Amt.-1 Lac)

Max. = 1000+4500=5500

Exceeding 10 Lac 5500+1/10% (Gross Amt.-10  Lac)

Max=60000

AIR TRAVEL AGENT SERVICES

(3) The value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent, shall be deemed to be an amount calculated at the rate of five percent. of the basic fare in the case of domestic  bookings, and at the rate of ten per cent. of the basic fare in the case of international bookings of passage for travel by air.

Explanation – For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airline.

Views: The methodology followed in this case is basically to exclude the value of ticket and to cover the amount being received by the agent as commission. Again, the agent has option to pay GST either on this notional  commission of 5% or 10%, as the case may be or on the original commission amount received by him. The concept  explained by way of following diagram:

Air Travell Agent

LIFE INSURANCE BUSINESS

(4) The value of supply of services in relation to life insurance business shall be:

(a) the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder, if such amount is intimated to the policy holder at the time of supply of service;

(b) in case of single premium annuity policies other than (a), ten per cent. of single premium charged from the policy holder; or

(c) in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year and twelve and a half per cent. of the premium charged from policy holder in subsequent years:

Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.

Premium Amounts

PROVISO : Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.

Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting  borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.

Dealer Chain

VALUE OF TOKEN, VOUCHER, COUPON, OR STAMP

(6) The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both  redeemable against such token, voucher, coupon, or stamp.

Views: The views are explained with help of following diagram/ case study:

Case Study 1

STOCK TRANSFER FOR SERVICES

(7)The value of taxable services provided by such class of service providers as may be notified by the Government on the recommendations of the Council as referred to in paragraph 2 of Schedule I between distinct persons as referred to in section 25, where input tax credit is available, shall be deemed to be NIL.

Views: The views are explained with help of following diagram/ case study:

More Under Goods and Services Tax

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Category : Goods and Services Tax (4841)
Type : Articles (14567)
Tags : goods and services tax (3403) GST (2992)

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