Value of Supply under GST Act, 2017 with rules
Value of Supply
Related Definitions :-
“open market value” of a supply of goods or services or both means the full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction, where the supplier and the recipient of the supply are not related and the price is the sole consideration, to obtain such supply at the same time when the supply being valued is made.
“supply of goods or services or both of like kind and quality” means any other supply of goods or services or both made under similar circumstances that, in respect of the characteristics, quality, quantity, functional components, materials, and the reputation of the goods or services or both first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both.
Provisions or Sections determine Value of Supply Under GST Act, 2017
Value of supply determined as per the Section 15 of the CGST Act, 2017.The meaning of the “Value of Supply” is defined in the 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 where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply”
The value of the supply shall include :- Section 15(2)
a. any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;
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;
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;
d. interest or late fee or penalty for delayed payment of any consideration for any supply; and
e. subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.
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.
The value of the supply shall not include any discount which is given:- Section 15(3)
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, 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.
As per Section 15(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.
As per Section 15(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.
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.
Rules determine Value of Supply Under GST Act, 2017
Rule 27 To 35 used for determine the value of supply under GST.
Value of Supply where consideration is not wholly in money (Rule 27 of the CGST Rules 2017)
For cases, where consideration for a supply is not wholly in money, value has to be determined sequentially as under:
- Open Market Value of such supply;
- Aggregate of the consideration in Money and equivalent Monetary value of the consideration not in money, if such amount is known at the time of supply;
- Value of supply of like kind and quality;
- Aggregate of the consideration in Money and equivalent Monetary value of the consideration not in money as determined under Rule 30;
- Aggregate of the consideration in Money and equivalent Monetary value of the consideration not in money as determined under Rule 31.
Value of supply of goods or services or both between distinct or related persons, other than through an agent (Rule 28 of the CGST Rules 2017)
- The value of supply in such cases have to be determined sequentially as under:
- Open Market Value of such supply;
- Value of supply of like kind and quality;
- Value of supply as determined under Rule 30;
- Value of supply as determined under Rule 31.
- It has also been provided that where the goods being supplied 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 unrelated customer.
- However, if the recipient of supply is eligible for full input tax credit, the invoice value will be deemed to be the open market value of the goods or services.
Value of supply of goods made or received through an agent (Rule 29 of the CGST Rules 2017)
- The value of supply of goods between the principal and his agent shall be determined sequentially as under:
- Open market value of 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 unrelated customer, where the goods are intended for further supply by the recipient;
- Value of supply as determined under the Rule 30;
- Value of supply as determined under the Rule 31.
Value of supply of goods or services or both based on cost (Rule 30 of the CGST Rules 2017):
· Value of Supply 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.
Residual method for determination of value of supply of goods or services or both (Rule 31 of the CGST Rules 2017):
· Value of Supply shall be determined using reasonable means consistent with the principles and the general provisions of Section 15 and the provisions of the Chapter IV of the CGST Rules, 2017.
Provided that in the case of supply of services, the supplier may opt for this rule, ignoring the rule 30 of CGST Rules, 2017.
Valuation in the case of supply of lottery, betting, gambling and horse trading (Rule 31A of the CGST Rules 2017)
· The value of supply of lottery shall be deemed to be 100/128 of the face value or the price notified in the Official Gazette by the Organising State, whichever is higher.
· The value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalisator.
Determination of value in respect of certain supplies (Rule 32 of the CGST Rules 2017)
For the below mentioned cases, at the option of the supplier, the value of supply would be determined as follows:
· Services in relation to Purchase or Sale of Foreign Currency (including money changing):
|
Case |
Value of Supply |
|
Where the foreign Currency is exchanged from, or to, Indian Rupees |
|
|
Where neither of the currencies exchanged is Indian Rupees |
The value shall be equal to 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 RBI. |
Option 2
Once this below mentioned option is exercised for a financial year, it cannot be withdrawn during the remaining part of that financial year.
|
Gross Amount of Currency Exchanged for an amount |
Value of Supply |
|
Up to Rs.1 lakh rupees |
1% of the Gross Amount or 250 rupees whichever is higher |
|
Exceeding Rs.1 lakh rupees and up to Rs.10 lakh rupees |
Rs.1000/- + 0.5% of the Gross Amount |
|
Exceeding Rs.10 lakh rupees |
A Rs.5500/- + 0.1% of the Gross Amount or B Rs.60000/-; Whichever is lower |
· Services by Air travel agent in relation to booking of tickets for travel by air
|
Nature of Travel
|
Value of Supply |
|
Domestic Travel |
5% of basic fare |
|
International Travel |
10% of basic fare |
· Services in relation to life insurance business
|
Nature of Life Insurance Policy |
Value of Supply |
|
Policy having dual benefits of Risk Coverage and Investment
|
Gross premium charged reduced by the amounts allocated for investment / savings on behalf of the policy holder, provided such amount is intimated to the Policy holder at the time of supply of service. |
|
Single premium annuity policies (not covered above) |
10% of Single premium charged |
|
Other Polocies |
A For 1st year 25% of premium B For subsequent year 12.50% of the premium |
|
However, where policy has benefit of only risk coverage of life, value of supply shall be the entire amount of premium |
|
- Value in case of Second Hand Goods Supplier:
- Value of Supply of taxable goods shall be the difference between the selling price and purchase price, provided the following conditions are satisfied:
- Such goods are supplied by a person dealing in buying and selling of second hand goods
- Second hand goods are supplied as such or after minor processing which does not change the nature of such goods.
- No ITC has been availed on purchase of such goods.
- If the value of supply derived as above is negative, it shall be ignored i.e., the taxable value would be Nil.
- Purchase value of goods repossessed from a defaulting borrower, who is not registered, 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.
- Value of redeemable token / voucher / Coupon / Stamp (other than Postage stamp):
- The value of such instruments 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 instruments.
Value of supply of services in case of a pure agent (Rule 33 of the CGST Rules 2017)
- The expenditure and costs incurred by the supplier of services, as a pure agent of the recipient of supply, has to be excluded from the value of supply, provided the following conditions are satisfied:
- the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient;
- 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
- 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.
For the purposes of this rule, ‘pure agent’ means a person who-
- 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;
- 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;
- does not use for his own interest such goods or services so procured; and
- receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his account.
Rate of exchange of currency, other than Indian rupees, for determination of value (Rule 34 of the CGST Rules 2017)
|
Nature of Supply
|
Value of Supply |
|
Taxable Goods |
Exchange rate as notified by the Board (CBIC) 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 CGST Act 2017 |
|
Taxable Services |
Exchange rate 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 CGST Act 2017. |
Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax (Rule 35 of the CGST Rules 2017)
· Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax, Union territory tax, the tax amount shall be determined as under: Tax amount = (Value inclusive of taxes * tax rate in % of IGST or, as the case may be, CGST, SGST or UTGST) ÷ (100 + sum of tax rates, as applicable, in %)
Source :-
ü CGST Act, 2017
ü Study Material WIRC
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