Valuation of Goods and/or Services
“A detailed analysis under GST regime”
“Taxes are the price of development and civilization, and it is worth it….” Oliver Wendell Holmes, Jr
Introduction
After the enactment of CGST Act 2017, the GST council also finalised the valuation rules to be applied in case of certain set of situations/ circumstances.
Broadly, under the GST regime following references have been made in context of the valuation of Goods and Services-
- Central Goods & Services Act 2017- Chapter IV, Section 15
- Integrated Goods and Services Tax Act 2017-Chapter IX, Section 20
- Goods and Services Tax Rules- Determination of Value of Supply
The brief of the various applicable provisions have been mentioned below, however the detailed analysis have been presented in the form of a Power Point presentation, uploaded/attached herewith.
Basis for valuation of a taxable supply under GST
The basis for valuation of supply of goods/ and services under the GST regime is the “Transaction Value” of Goods/ and services. However under the existing law, Excise duty payable on one of following basis
- Specific duty, based on some measure like weight, volume, length etc.
- Duty as % of Tariff Value fixed under section 3(2)
- Duty on basis of production capacity – section 3A of Central Excise Act
- Duty based on basis of Maximum Retail Price printed on carton after allowing deductions – section 4A of CEA
- Duty as % based on Assessable Value fixed under section 4 (ad valorem duty) (If not covered in any of above)
As per Sec 15(1) of the CGST Act 2017,
The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
Conditions for the applicability of Sec 15(1)
- It is “applicable”to both goods and services
- Transaction value is the “price”of the goods/ services
- Price is the only form of “consideration”
- The transaction should be between “unrelated parties”
Inclusions and Exclusions in the Value of Supply-Sec 15(2 & 3) of the CGST Act 2017 explains the specific items of inclusions and exclusions while determining the transaction value for the supply of goods/ services. For details refer Power Point presentation, uploaded/attached herewith.
Determination of Value of Supply Rules
Sec 15(4) explains that, Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.
| Rule | |
| 1 | Where the consideration is not wholly in money |
| 2 | Supply is between distinct/related persons, other than through an agent |
| 3 | Supply made or received through an agent |
| 4 | Supply based on cost |
| 5 | Residual method |
| 6 | Determination of value in respect of certain supplies |
| 7 | Value of supply of services in case of pure agent |
| 8 | Rate of exchange of currency, other than Indian rupees, for determination of value |
| 9 | Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax |
For details refer Power Point presentation, uploaded/attached herewith.
Conclusion
Valuation rules have given broad guidelines as to what will be the value on which GST is required to be paid on goods and services. The Govt has tried to take keen steps for presenting these rules in a lucid form for facilitating ease of business and reducing the probable causes of litigations which have been raised in the existing laws. We hope that this new tax structure will bring a positive revolution for the future of India.
Author Bio
I have purchased silver bar from open market for Rs.1000.00 and can I sell it for the same amount or even my profit has to be added for Rs.1000.00
Nice Article