Value of Supply under GST with illustration.
The value of supply is defined in the CGST Act 2017, and the same is referred in other GST Acts, viz, SGST Act, IGST Act and the UTGST Act, 2017 wherever required.
Definition: Value of Supply
Section 15. (1) 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.
(2) Shall include
(a) any taxes, duties, cesses, fees and charges levied under any law other than SGST, UTGST and GST (compensation to state) Acts
(b) any amount the supplier is liable to pay which is incurred by the recipient of the supply and not included in the original price
(c) incidental expenses, commission and packing, and any other amount charged by the supplier at the time of, or before delivery/supply of goods and services
(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and
(e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. But Government subsidies received by the supplier is to be included
(3) Shall not include,
a) Any discount given before or at the time of supply provided it should be recorded in invoice
b) Any discount given as per agreement entered before the supply and linked to the invoice and ITC to the extent of discount is reversed by the recipient of supply
(4) If the value of the supply of goods or services or both cannot be still be determined, the same shall be determined in such manner as may be prescribed.
(5) Apart from the above, the value of such supplies may also be notified by the Government on the recommendations of the Council in such manner as prescribed
As an explanation, to this section the related party is defined separately.
Illustrations
Query 1
A Ltd, Chennai raises invoice for supply of cloth to B Ltd, Chennai for Rs. 100/- and charges Rs. 10/- (Rs.5 CGST and Rs.5 SGST)
Whether Rs. 110/- is chargeable to further GST.
Solution 1
No. (Refer 2(a)) as CGST and SGST are GST Laws
Query 2
A Ltd raises invoice for supply of electricity to B Ltd for Rs. 100/- and charges 1% tax on electricity of Rs. 10/-.
Solution 2
Whether GST @ 10 % is applicable on Rs. 110/-
Yes. (Refer 2(a)) as tax on electricity is covered by any taxes covered by any other law.
Query 3
A Ltd order supply of one motor cycle to B Ltd for Rs. 10,000/-. The name plate was not included in the order specification. But B supplies motor cycle with name plate worth Rs. 100/-
Whether the value of supply is Rs. 10,000/- or 10,100/-
Solution 3
The value of supply is Rs. 10,100/- as the name plate is mandatory part for the vehicle to get registered by A ltd. Had B Ltd not fixed, the name plate, A had to incur the expense of Rs.100/- before registration.
Rs.100/- is an incidental expense and incurred on behalf of A Ltd. [(Ref 2(b) and 2(c)].
Query 4
A Ltd, a farming company received a subsidy of Rs. 10,000/- under the Government sponsored subsidy scheme.
Whether Rs. 10,000/- is taxable.
Solution 4
No, it is not taxable as it is a Government subsidy. (Ref 2(e))
Query 5
X bank Ltd gives one percent (under favorable terms) interest investment loan of Rs. 50 Lakhs to A ltd for building factory in a backward district.
Whether Rs. 50 Lakhs is a taxable supply
Solution 5
Yes. Taxable as the subsidized interest loan is not given by the Government.
Query 6
A Ltd orders 100 mobile phones @ Rs. 1000/- each on B Ltd; both are in Chennai, vide order dt 1st September 2017 with discount term of 1 %.
B supplies 100 mobiles on 10th September 2017 and raise invoice as given below:
Value of 100 mobiles – Rs.1,00,000
Less: Discount 10 % – 10,000
Balance Rs. 90,000/-
CGST @ 5% – Rs. 4,500/-
SGST @ 5 % – Rs. 4,500/-
Total – Rs. 99,000/-
Whether discount not included in the taxable value is correct?
Solution 6
Yes. Correct. As discount allowed is in order. Since it is given at the time of supply and also recorded in invoice.
Query 7
Ø A Ltd, Chennai released first order A-222 dt 1st September 2017 for supply of 100 mobile phones @ Rs. 1000/- each on B Ltd, Chennai,
B supplies 100 mobiles on 10th September 2017, raises invoice on A Ltd; as given below:
Date 10th September 2017
To
A Ltd
PO No A-222 dt 1st September 2017
Rs.
Value of 100 mobiles – 1,00,000/-
CGST @ 5% – 5,000/-
SGST @ 5 % – 5,000/-
Total – 1,10,000/-
Ø A Ltd released second order A-223 dt 1st October 2017 with the same terms for supply of another 100 mobiles to B Ltd.
B supplies 100 mobiles on 10th October 2017, raises invoice on A Ltd; as given below:
Date 10th October 2017
To
A Ltd
PO No A-223 dt 1st October 2017
Rs.
Value of 100 mobiles – 1,00,000/-
CGST @ 5% – 5,000/-
SGST @ 5 % – 5,000/-
Total – 1,10,000/-
Ø A Ltd issued third order A-224 dt 15th December 2017 with discount amount of Rs. 1000/- towards the supplies received. Based on the order, A issued credit note no 1 dt 15th December 2017 to B Ltd as given below:
Date 15th December2017
To
B Ltd
Discount to-wards supply of mobiles
against order A-222 and A-223 -Rs.1000/-
Less
CGST @ 5% – 50/-
SGST @ 5 % – 50/-
Total – 900/-
Whether the value of Rs. 1000/- claimed is a supply? and tax is refundable
Solution 7
No, it is not a supply and tax credit of Rs. 100/- will not be refunded as
a) The agreement for discount is dated 15th November 2017, which is after the supplies
and
b) The invoice was not linked to the discount terms.
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