Hello friends greetings for the day, in the current article we will discuss about valuation of taxable supply as according to valuation of taxable supply billing or tax invoice can be made by the supplier it will help him to know what are the things which should be included or excluded.In the article first the bare act has been given after that summary of each section or clause has been given for better understanding.
1. As per 15(1) of 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.
Summary: As per the above provision the value of supply shall be the transaction value or the amount charged by the supplier from the recipient however supplier and recipient must not be related party and supply must be the sole consideration it means that related party supply are not dealt with this provision related party supplies will be valued as per Rule 28 of CGST rule 2017 and price shall be the sole consideration it means transaction value should be in money only.
2. The value of supply shall include:-
(a). any taxes, duties, cesses, fees and charges levied if charged separately by the supplier;
Summary: As per the above provision value of supply will include any kind of taxes, duties it means any taxes charged under any law for the time being in force shall be added to the value of supply like municipal taxes, excise duty, entertainment tax.
(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;
Summary: Value of supply of goods or services shall include any payments made by third party, in case any payment is made by recipient on behalf of supplier or by any other party then the value of supply shall include such amount paid by recipient or such other party.
(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;
Summary: Any incidental expenses which are important for the supply of goods or services then value of such incidental expenses should also be added to the value of supply but it should be kept in mind that incidental expenses “at the time of, or before” delivery of goods are incurred should only be added in the value of supply.
Any incidental expenses incurred after the delivery of goods or services would be dealt with “Debit note”. Debit note would be issued for any further incidental expenses.
(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and
Summary: As per the above provision in case of any interest or late fees or penalty for delayed payment of consideration would also be added in the value of the supply.
(e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.
Summary: As per the above provision any subsides directly linked to the price would be added to the value of supply for example if any supplier is getting subsidies from any charitable institution for supply of stationery to poor children and subsidy is directly linked to the price of stationery then this amount of subsidy would also be added in the value of supply, However the value of supply will not include subsidy by Central government or State Government.
Explanation.––For the purposes of this sub-section, the amount of subsidy
shall be included in the value of supply of the supplier who receives the subsidy.
3. The value of the supply shall not include any discount which is given––
(a). before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply;
(b) after the supply has been effected, if—
(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.
Summary: As per the above provision if any discount is given by the supplier before or at the time of supply and such discount is clearly mentioned in the invoice then the discount should be deducted from the value of supply.
(4) 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.
Summary: As per the above provision if the value of supply cannot be determined as per the above provisions then value of supply shall be calculated as per Rule 27-31 of CGST Rule 2017.
(5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.
Summary: As per the above provision it is clarified that for certain supplies value of taxable supply would be ascertained as per the rules framed specifically. The value of taxable supply would be determined as per those rules and not by the above provisions however there is no such specific rules notified yet.
Explanation.—For the purposes of this Act,––
(a) persons shall be deemed to be “related persons” if––
(i) such persons are officers or directors of one another’s businesses;
(ii) such persons are legally recognized partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;
(b) the term “person” also includes legal persons;
(c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.
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