Value of Taxable Supply of Goods or Services or Both under GST Act [Section 15 of CGST Act. 2017]

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GST is payable on the value of taxable supply of goods or services or both. Therefore, determination of ‘Value of Taxable Supply’ is significant under GST law as it will determine the amount of tax to be paid by the supplier of taxable supply. It is the value on which tax will be computed and paid under GST laws. In the case of some suppliers such as traders purchase price shall always be available to the revenue authorities as a guiding benchmark.

However in the case of manufacturer or provider of service quality of product/service or brand name under which such goods or services arc supplied shall also have to be considered, besides the cost of such goods/services.

1. Where the Supplier and the Recipient Of the Supply are ‘Not Related Person’ and the Price is the Sole Consideration for the 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.

However, “Transaction Value” shall be considered as value of taxable supply of goods only when both the following conditions are satisfied:

(a) Supplier and the Recipient of the Supply arc Not Related Person [ Explanation to Section 15]  :

and

(b) The price is the Sole Consideration for the supply.

Note :
Meaning of ‘Related Persons’ [Explanation to section 15]

Persons shall be deemed to be “related persons” if—
(i)         such persons arc officers or directors of one another’s businesses;
(ii)        such persons arc legally recognized partners in business;
(iii)       such persons are employer and employee;
(iv)       any person directly or indirectly owns, controls or holds 25% 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.
1. The term ‘Person” also includes legal persons:

2. Persons who arc 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.

2. What is to be Included in the Value of Supply ? [Section 15(2)]

The value of supply shall include—

(1)       any taxes, duties, cesses, fees and charges levied under any law for the time being in force (other than CGST Act, SGST Act, UTGST Act and the Goods and Services Tax (Compensation to States) Act), if charged separately by the supplier;

(2)       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;

(3)       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;

(4)       interest or late fee or penalty for delayed payment of any consideration for any supply: and

(5)       Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. The amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

Example 1

Mr. Dust a trader has agreed to supply certain imported goods for Rs. 15,00,000 + Basic Customs Duty (BCD) of Rs. 1,50,000 to Mr. Dirty.

In this case, BCD shall also be included in the transaction value, if it is charged separately in the invoice raised by the supplier of goods. Hence, GST shall be charged on Rs. 16,50,000 at the applicable rate of such supplies.

Example 2

Mr. Dust & Sons has agreed to supply a TV to Mr. Dirty at his residence. Mr. Dust & Sons raises the invoice for Rs. 80.000 for the said supply. Mr. Dirty paid Rs. 80.000 to the supplier at his shop. Further, Mr. Dirty paid Rs. 2,000 to concerned Tempo Agency who delivered the TV at his residence, though it was payable by Mr. Dust & Sons as the term of supply was free delivery at his residence.

In this case, Rs. 2,000 paid to Tempo Agency shall be included in the value of taxable supply. Consequently, value of taxable supply shall be Rs. 82,000 [ Rs. 80,000 + Rs. 2,000] for the purpose of levy of relevant GST

3. What is to be Excluded in the Value Of Supply ? [Section 15(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; and

(b)       after the supply has been effected provided both the following conditions arc satisfied.—

(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.

Example-1:
Mr. Dust, a trader provides the following information in his invoice dated 9.11.2017

ParticularsAmount (Rs.)
Supply of 100 pieces of shirt of different colors at the rate of Rs. 800 per pieceRs. 80,000
Discount 20%Rs.16,000
Net amount payableRs. 64,000

In this case, the value of supply of goods shall be Rs. 64.000.

Example-2 :

Mr. Dust Ltd. a manufacturer of readymade garments appointed certain dealers for selling its goods. He entered into an agreement to allow 5% discount by way of credit note if a dealer purchases goods for more than Rs. 50,00,000in a period of six months from the date of first supply.

In this case, the aforesaid discount which was not known either before or at the time of supply of relevant goods shall not be deducted from the value of supply made by Mr. Dust Ltd.

One dealer Mr. Clean exceeded the target and Mr. Dust Ltd. issued a credit note of 5% additional discount for all the supplies made to such dealer in the period of six months.

In such case, discount given by issuance of credit note to the dealer by Mr. Dust Ltd. is under an agreement entered into by Mr. Dust at the time of supply of goods and thus such discount shall not form value of supply provided input tax credit has been reversed by such dealer to whom credit note was issued, of the supply as is attributable to the discount on the basis of credit note issued by the supplier.

4. Value of Suppls Of Goods or Services where the consideration is Not wholly in Money [Rule 27 of CGST Rules, 2017]

Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall be as under,—

SituationValue of Supply
(a) Where the open market value of supply is availableThe open market value
(b) If the open market value is not available under clause (a)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
(c) If the value of supply is not determinable under clause (a) or clause (b)The value of supply of goods or services or both of like kind and quality
(d) If the value is not determinable under clause (a) or clause (b) or clause (c)The sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by the application of rule 30 or rule 31 in that order.

Examples :
(1) Where a new phone is supplied for Rs. 20,000 along with the exchange of an old phone and if the price of the new phone without exchange is Rs. 24,000, the open market value of the new phone is Rs. 24,000.

(2) Where a laptop is supplied for Rs. 40,000 along with the barter of a printer that is manufactured by the recipient and the value of the printer known at the time of supply is Rs. 4,000 but the open market value of the laptop is not known, the valueof the supply of the laptop is Rs. 44.000.

5.     Value of Supply of Goods or Services or Both between ‘Distinct or Related Persons’, other than through an ‘Agent’ [Rule 28 of CGST Rules, 2017]

The value of the supply of goods or services or both between distinct persons as specified in section 25(4) and (5) or where the supplier and recipient are related, other than where the supply is made through an agent, shall be as under—

SituationValue of Supply
(a) Where the open market value of supply is availableThe open market value
However, where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or
services
(b) If the open market value is not availableThe value of supply of goods or services of like kind and quality
However, 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.
(c) If the value is not determinable under clause (a) or (b)The value as determined by the application of rule 30 or rule 31, in that order

6. Value of Supply of Goods made or received through an Agent [Rule 29 of CGST Rules, 2017]

The value of supply of goods between the principal and his agent shall as under—

SituationValue of Supply
(a) Where the open market value of supply of goods is availableThe open market value of the goods being supplied, or at the option of the supplier, be 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, where the goods arc intended for further supply by the said recipientIllustration :A principal supplies groundnut to his agent and the
agent is supplying groundnuts of like kind and quality
in subsequent supplies at a price of Rs. 5,000 per
quintal on the day of the supply. Another independent
supplier is supplying groundnuts of like kind and
quality to the said agent at the price of Rs. 4,550 per
quintal. The value of the supply made by the principal shall be Rs. 4,550 per quintal or where he exercises the option. the value shall be 90% of Rs. 5,000 i.e., Rs. 4,500 per quintal.
(b) Where the value of a supply is not determinable under clause (a)It shall be determined by the application of rule 30 or Rule 31 in that order

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