“Understand GST’s value of supply: Key to accurate tax calculation, with focus on transaction value, inclusions/exclusions, and discounts. Essential for compliance and precise tax payments.”
Under GST Act, tax is payable on the value of taxable supply of goods or services or both. Therefore, determination of value of taxable supply is important as it will determine the amount on which tax is to be payable by the supplier. Determination of Value of Supply have been prescribed in Section 15 of CGST Act, 2017.
Overview of Section 15:
Section 15(1): Transaction Value
Section15(2): Inclusions and Exclusions to the Value of Supply
Section 15(3): Non-inclusion of discount in value of supply
Section 15(4): Determination of value as per the Rules
Section 15(5): Government to Notify the determination of value in certain supplies
Section15(1): Value of supply shall be the Transactional Value which is the price actually paid or payable for the supply of goods or services or both where both the supplier and the recipient are not related and price is the sole consideration for the supply. It includes any amount which the supplier is liable to pay but which has been incurred by the recipient of the supply.
Section 15(2): The value of supply shall include:
- Any taxes, duties, cess, fees, and charges levied under any Act, except GST Act. GST Compensation Cess will be excluded if charged separately by the supplier.
- Any amount that the supplier is liable to pay which has been incurred by the recipient and is not included in the price actually paid or payable for the goods or services or both.
But in some cases, the customer may make direct payment of such expenses to the third person which was supposed to be incurred by the supplier, then such amount paid by the customer shall form part of value of supply, if the supplier has not included such amount in the invoice raised for the supply.
- All incidental expenses in relation to sale such as packing, commission etc charged by the supplier.
- Subsidies directly linked to the price except subsidies provided by Central Govt & State Govt. The amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.
- Interest/late fee/penalty for delayed payment of consideration for any supply.
Section 15(3): Discounts if any to be excluded from the value of supply
The value of supply shall not include any discount which is given:
Before/At the Time of Supply: If duly recorded in the invoice issued in respect of such supply.
After the supply has ben effected: provided both the following conditions are satisfied:
- If in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices, and
- ITC has been reversed by the recipient on the basis of supplier’s document.
Section 15(4): Determination of value as per the Rules
Where the value of the supply of goods or services or both cannot be determined u/s 15(1), the same shall be determined in such manner as may be prescribed
1. Value of supply, where consideration for such supply is not wholly in money, shall be:
- open market value of such supply;
- if the open market value is not available, the value shall be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply;
- if the value of supply is still not determinable, then the value shall be the value of supply of goods or services or both of like kind and quality;
- Still if the value is not determinable, then the same shall be determined by the application of rule 30 or rule 31 in that order.
2. Value of supply of goods or services between distinct or related persons other than through an agent shall be,
- open market value of such supply;
- if the open market value is not available, then the value shall be the value of supply of goods or services of like kind and quality;
- if still the value is not determinable, then the same shall be determined by the application of rule 30 or rule 31, in that order.
- Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person.
3. Value of supply made through an agent shall be,
- be the open market value of the goods being supplied, or at the option of the supplier, be ninety per cent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient
- where the value of a supply is not determinable, the same shall be determined by the application of rule 30 or rule 31 in that order.
4. Value of supply of goods or services or both made on cost [Rule 30]
- Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be 110% of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services.
1. Residual method for determination of value of supply of goods or services or both: [Rule 31]: Where the value of supply of goods or services or both cannot be determined under any of the above, the same shall be determined using reasonable means consistent with the principles and general provisions of Section 15 and its rules. However, in case of supply of services, the supplier may directly opt for Rule 31 ignoring Rule 30.
2. Value of supply in case of lottery, betting, gambling & horse racing:
Where lottery is run by State Government or it is authorised by State Governments
Higher of the following:
- 100/128 of the face value of ticket, or
- 100/128 of the price as notified in the Official Gazette by the organising state.
Value of Actionable Claim in form of betting, gambling or horse racing in a race club
- 100% of the face value of the bet or the amount paid to totalisator.
Section 15(5): Value in case of Notified Services
1. The value of supply of services in relation to the purchase or sale of foreign currency, including money changing, shall be determined by the supplier of services in the following manner, namely:-
- for a currency, when exchanged from, or to, Indian Rupees, 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 reference rate for that currency at that time, multiplied by the total units of currency:
- Provided that in case where the Reserve Bank of India reference rate for a currency is not available, the value shall be one per cent of the gross amount of Indian Rupees provided or received by the person changing the money.
2. The value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent:
- In case of domestic bookings: 5% of the basic fare
- In the case of international bookings: 10% of the basic fare
3. The value of supply of services in relation to life insurance business shall be,
- 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 an amount is intimated to the policy holder at the time of supply of services.
- in case of single premium annuity policies other than stated above, 10% of single premium charged from the policy holder; or
- in all other cases, 25% of the premium charged from the policy holder in the first year and 12.5% of the premium charged from the policy holder in subsequent years.
Further, the above stated clauses shall not apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.
4.Value of supply of services in relation to second hand goods:
- a person dealing in such goods may be allowed to pay tax on the margin e. the difference between the value at which the goods are supplied and the price at which the goods are purchased.
- If there is no margin, no GST is charged for such supply.
- In case any other value is added by way of repair, refurbishing, reconditioning etc., the same shall also be added to the value of goods and be part of the margin.
- Intra-State supplies of second hand goods purchased from unregistered dealer & received by a registered person, dealing in buying and selling of second hand goods and who pays the Central tax on the value of outward supply of such second hand goods is exempted.
5. In case of any voucher, token or coupon is used, then the value shall be the money value of the goods or services against which it is being redeemed.
6. Value inclusive of Integrated Tax, Central Tax and State Tax
Tax Amount = Value incl. taxes X Tax rate in % of I,C,S/UT
100+ sum of tax rates
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