In first week of December 2015, the draft GST law was published on the web portals of few State Governments. In this article, the author has tried to decode the provisions of valuation in the draft GST law.
As per section 17 of the draft GST law, the value on which GST will be levied is transaction value. Transaction value is defined to mean ‘the price actually paid or payable for the said supply of goods and/or services where the supplier and recipient are not related and price is the sole consideration’
As per Section 17(2) of the draft GST law, the transaction value, in addition to the price charged, shall include the following:
It can be observed that most of the recoveries (such as commission, free of cost supplies, subsidies etc) which could be in connection with the supply are proposed to be covered under value and may attract GST.
As regards discounts, it is pertinent to note that the transaction value shall exclude the discounts allowed at the time of or before the time of supply if the same are recorded in the invoice issued in respect of supplies, however, discounts allowed post supply will not be allowed as deduction, as the same is specifically included in definition of transaction value, as aforesaid.
Retail Sale Price (RSP)
Please note that in case goods are sold to the person who is not a taxable person, than the value on which GST will be charged is the retail sale price less GST levied on the goods, provided the goods are covered under Legal Metrology Act, 2009 (LMA) or rules made there under. Currently in Central Excise law, duty of excise is levied on RSP if the goods covered under LMA and are notified by Central Government. Currently, the value of such goods is determined as under:
RSP (as appearing on the product) minus Abatement (as provided by Central Government in the Notification)
The manufacturer is not required to track as to whether the goods are bought for use in business or otherwise. It is pertinent to note that now manufacturer including dealer has to track whether the buyer of goods is a taxable person or not and accordingly will be required to value the goods.
Current provisions of service tax valuation rules provide for deduction of amount from the gross amount charged, if the conditions of pure agent are satisfied. It is pertinent to note that the said provisions are continued in GST as well and the service provider will be eligible for deduction from the transaction value of so much of the amount which is incurred by him as pure agent.
The efforts of Government in the direction for introduction of GST show that the Government is gearing up for implementation of GST. It is now the Industry who has analysis and understand the impact of implementation of GST on their operations for smooth implementation and compliance with the law for their organisation.