Value of Supplies Notified by Government Under Rule 32,33,34 of CGST Rules, 2017

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Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter.

1. Services in relation to the Purchase or Sale of Foreign Currency, Including Money Changing [Rule 32(2) of CGST Rules, 2017]

(A) :     Alternative – 1

(a) Where one of the Currency Exchanged is Indian Rupees

(i) for ‘Purchase of Foreign Currency’ by the Supplier

The Value shall be = ( difference in the Buying Rate and the Reserve Bank of India Reference Rate for that Currency at that time) X ( the total units of Currency) :

However, where the Reserve Bank of India reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided by the person changing the money.

Example-1:

R converted US$ 1000 from the authorized money changer @ Rs. 65 per USS and received Rs. 65,000.

RBI Reference Rate for US$ is Rs. 65.50 for that day. As per RBI Reference Rate the amount should have been 1000 x 65.50 = Rs. 65,500.

Thus, the difference of Rs. 500 (i.e. Rs. 65,500 – 65,000) will be treated as taxable value of the service in relation to exchange of money.

If the Reserve Bank of India reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided by the person changing the money. Thus it shall be 1% of Rs. 65,000 = Rs. 650.

(ii) for ‘Sale of Foreign Currency’ by the Supplier

The Value shall be = ( difference in the Selling Rate and the Reserve Bank of India Reference Rate for that Currency at that time ) X ( the Total Units of Currency) :

However, where the Reserve Bank of India reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees received by the person changing the money.

Example 2 :

‘R’ converted INR 90,000 into Great Britain Pound (GBP) from the authorized Money Changer and the Exchange Rate offered was Rs. 90, and therefore he received GBP 1000.

RBI Reference Rate for that day for GBP is Rs. 89. Thus as per RBI Reference Rate, he should have paid Rs. 89,000 (GBP 1000 x 89).

The taxable value of Service in this case shall be Rs. 90,000 – Rs. 89,000 = Rs. 1000.

However, where the Reserve Bank of India Reference Rate for a Currency is not available, the value shall be 1% of the gross amount of Indian Rupees received by the person changing the money. It shall be 1% of Rs. 90,000 = Rs. 900.

(b) Where Neither of the Currencies Exchanged is Indian Rupees

the Value shall be = 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the Reference Rate provided by the Reserve Bank of India.

(B). : Alternative-2

At the option of the Supplier of Services,

the value in relation to the supply of foreign currency, including money changing. shall be deemed to be—

Amount of currency
exchanged
Value of Supply
(i) Where the currency exchanged does not exceed Rs. 1,00,0001% of the gross amount of currency exchanged. subject to a minimum amount of Rs. 250
(ii) Where the currency exchanged exceeds Rs. 1,00,000 but does not exceed Rs. 10,00,000Rs. 1,000 plus 0.5% of the gross amount of currency exchanged for an amount exceeding Rs. 1,00,000 and up to Rs. 10,00,000
(iii) Where the currency exchanged exceeds Rs. 10,00,000Rs. 5,500 plus 0.1% of the gross amount of currency exchanged for an amount exceeding Rs 10,00,000, subject to a maximum amount of Rs. 60,000.

However, the person providing the service shall exercise Alternative 2 above for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

Example :

Compute the value of supply of services as per Alternative 2 above:

  1. Exchanged US$ 800 and paid Rs. 52,000
  2. Exchanged US$ 2500 and paid Rs. 1,62,500
  3. Exchanged British £15000 and paid Rs. 12,60,000

Solutions :

Value of supply shall be:

Particulars(Rs.)
Case 1 : Rs. 52,000 x 1% or 250 whichever is higher520
Case 2 : Rs. 1,62,500 
On Rs. 1,00,0001,000
Balance Rs. 62,500 x 0.5%313
 1,313
Case 3 : Rs. 12,60,000 
Up to Rs. 10,00,0005,500
Balance Rs. 2,60,000 x 0.1%260
 5,760

2. The Value of the Supply of Services to Booking of Tickets for Air Travel provided by an Air Travel Agent  [Rule 32(3)]

(a) In case of Domestic Booking :   5% of the Basic Fare

(b) In case of International Booking :        10% of the Basic Fare.

Explanation.—For the purposes of this sub-rule, the expression ‘Basic Fare” means that part of the Air Fare on which Commission is normally paid to the Air Travel Agent by the Airlines.

3. The Value of Supply of Services in relation to Life Insurance Business [Rule 32(4)]


(a) Where the amount allocated for investment, or savings on behalf of the policy holder is intimated to the policy holder at the time of supply of service
The gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder.
(b) in case of single premium annuity policies other than (a)10% of single premium charged from the policy
holder; or
(c) in all other cases25% 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:
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.

4. Where a Taxable Supply is provided by a person dealing in Buying And Selling Of Second Hand Goods where No ITC (Input Tax Credit) availed [Rule 32(5)]

The value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it 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.

5. 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. [Rule 32(6)]

It shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon. or stamp

6. The Value of Taxable Services provided by Service Providers Notified by the Government, on the recommendations of the Council, where ITC (Input Tax Credit) is Available. [Rule 32(7)]

… It shall be deemed to be NIL

7. Value of Supply of Services in case of pure ‘Agent’ [Rule 33 of CGST Rules, 2017]

Notwithstanding anything contained in the provisions of this Chapter, 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 the 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, the expression “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.

Example

Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees. A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement  and not part of the value of supply made by A to B.

8. Rate of Exchange of Currency, other than Indian Rupees, for determination of Value [Rule 34 of CGST Rules, 2017] .

  • The Rate of Exchange for determination of value of taxable goods shall be the applicable rate of exchange as notified by the Board under section 14 of the Customs Act, 1962 for the date of time of supply of such goods in terms of section 12 of the Act.
  • The rate of exchange for determination of value of taxable services shall be the applicable rate of exchange determined as per the generally accepted accounting principles for the date of time of supply of such services in terms of section 13 of the Act.

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