by Section 15 of the CGST Act provides common provisions for determining the value of goods and services. It provides the mechanism for determining the value of a supply which is made between unrelated persons and when price and only the price is the sole consideration of the supply. When value cannot be determined under section 15, the same is determined using Chapter IV: Determination of Value of Supply of CGST Rules.
Section: 15 Value of Taxable Supply
Section 15(1): The value of goods or services or both shall be the transaction value, which is 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.
Section 15(2): Inclusion to Transaction Value
a) Duties and taxes: All taxes levied under any law for time being in force other than GST Acts if charged separately.
b) 3rd Party Payments: Any payment incurred by the recipient for which supplier is liable to pay.
Second proviso to rule 37(1) of CGST Rules, inserted w.e.f. 13-6-2018 stating that Payment by the recipient on behalf of supplier is deemed to be paid to the supplier and reversal of proportionate credit (for non-payment in 180 days) is not required.
c) Incidentals Expenses: Any incidental expenses charged by supplier & any amount charged for anything done by the supplier at the time of supply or before delivery. For e.g.- Packing, labelling, designing, Excise Duty, Royalty, warranty charges etc.
d) Interest, Late Fees, Penalty: for delay payment of consideration.
e) Subsidy: Subsidy directly linked to the price excluding subsidies directly provided by Central and State Government.
Section 15(3): Deduction of Discount
The value of supply shall not include any discount which is given:
a) Any discount is given before or at the time of supply: Deductible from value.
b) Any discount is given after supply:
Agreed at the time of supply or before supply; Deduction allowed if:
- Linked to the Invoice
- ITC Reversed by the recipient.
Not Agreed at the time of supply or before supply; Not Deductible from value.
Section 15(4): Where the value of supply of goods or services or both cannot be determined under subsection (1), the same shall be determined in such a manner as may be prescribed. (i.e. GST RULES,2017).
Section 15(5): Notwithstanding anything contained in subsection (1) or subsection (4), the value of such supplies as may be notified by the Govt. on the recommendation of the council shall be determined in such manner as may be prescribed.
Determination of Value of Supply
- Open Market Value: Of a supply of goods or services or both means the full value in money, excluding GST payable by a person in a transaction,
- Where the supplier and recipient of supply are not related
- Price is the sole consideration
To obtain such a supply at the same time when the supply being valued is made.
- Supply of Goods or Services 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 is mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both.
- Sec 2(5) Agent: means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another;
- Sec 2(88) Principal: Means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.
CGST rules 2017
RULE 27: When consideration is not wholly in money
a) Open market value (OMV)
b) If (a) is not available,
VALUE = Consideration in money + FMV of consideration not in money
c) If (a) & (b) not determinable,
VALUE = Value of Like, Kind & Quality
d) If (a), (b) & (c) not determinable then apply Rule 30 & Rule 31 in that order. (Discussed latter)
RULE 28: Supply Between Distinct or Related Person
a) Open market value (OMV)
b) If (a) is not available,
VALUE = Value of Like, Kind & Quality
c) If (a) & (b) not determinable, then apply Rule 30 & Rule 31 in that order. (Discussed latter).
PROVISO 1: if the further supply of goods is as such by the recipient at the option of the supplier,
VALUE= 90% OF THE PRICE CHARGED FOR LIKE, KIND & QUALITY BY THE RECIPIENT.
PROVISO 2: If the recipient is eligible for full ITC then,
OMV= Value declared in the invoice for the supply of goods or services.
RULE 29: Supply Between Principal and Agent
a) Open market value (OMV)
OR
90% of the price of like, kind and quality by the recipient. Where such goods are intended for further supply.
b) If (a) is not available then Rule 30 or 31 in order.
RULE 30 & 31 are applicable in order in the following cases:
- If the situation is covered under Rule 27, 28, 29 and valuation cannot be determined by applying the principal mentioned in respective rules.
- If the Situation is not covered by aforesaid rules.
RULE 30: Value of Supply Based on Cost
VALUE = 110% OF
- Cost of production
- Cost of acquisition
- Cost of the provision of Services.
RULE 31: Residual method or best judgment by using reasonable means
Consistent with principles & general provision of Sec 15
Provisions of Rule 27 to Rule 30 of CGST Rules
PROVISO: In case of the supply of services suppliers may opt for rule 31 instead for rule 30.
