IN MY EARLIER ARTICLE WE DISCUSSED ABOUT RULE-1 TO RULE-5 OF THE VALUATION RULES. IN THIS ARTICLE WE ARE GOING TO DISCUSS ABOUT THE PENDING RULE-6 AND RULE-7.
Rule-6: Determination of Value in respect of certain supplies:
This rule starts with a non obstant clause i.e. notwithstanding any thing contained in other rules, value shall at the option of the supplier in respect of certain supplies as specified hereinafter be determined as per this rule:
A) Value of Supply of services in relation to purchase or sale of foreign currency:
Case-1: When currency bought or sold is Indian currency and RBI reference rate is available:
Value= (RBI Reference rate – buying rate) or (Selling rate – RBI Reference rate)
Case-2: When currency bought or sold is Indian currency and RBI reference rate is not available:
Value = 1% of gross amount of Indian rupee received or provided.
Case-3: When neither of the currency exchanged is Indian rupee:
Value = 1 % of the lesser amount of Indian rupee received on converting any of the two currency into Indian rupee at RBI reference rate.
Provided that the person providing 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may exercise option to ascertain value in terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that financial year.
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
Case-1: Amount Exchanged is up to Rs 100000:
Value = 1% of gross amount of currency exchanged up to rs 100000 subject to minimum Rs 250
Case-2: Amount Exchanged exceeding Rs 100000 and up to Rs 10,00,000:
Value = 1000 + 0.5% of gross amount of currency exchanged exceeding Rs 100000 up to rs 10,00,000 and,
Case-3: Amount Exchanged exceeding Rs 10,00,000:
Value = 5500 + 0.10% of gross amount of currency exchanged for an amount exceeding Rs 10,00,000. Maximum amount Rs 60,000.
C) 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:
In case of domestic booking: 5% of basic fare.
In case of international booking: 10% of basic fare.
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.
D) The value of supply of services in relation to life insurance business shall be:
a) Gross premium charged 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.
E) Value in case of a person engaged in purchase or sale of second hand goods:
Value = (Selling price – purchase price), if no input tax credit is availed on purchase of goods.
Further if the above value is negative the same shall be ignored.
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.
F) 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.
G) 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.
Rule-7: Value of supply of services in case of pure agent
Notwithstanding anything contained in these rules, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely:-
(i) the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party on authorization by such recipient;
(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and
(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.
Explanation- For the purposes of this rule, “pure agent” means a person who –
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.