GST – GST FAQ 3rd Edition – December, 2018 – 06 – 6. Valuation in GST Q 1. What is the value of taxable supply to be adopted for the levy of GST? Ans. The value of taxable supply of goods and services shall ordinarily be the transaction value which is the price paid or payable, when the parties are not related and price is the sole consideration. Section 15 of the CGST/SGST Act further elaborates various inclusions and exclusions from the ambit of transaction value. For example, the transaction value shall not include refundable deposit, discount allowed subject to certain conditions before or at the time of supply. Q 2. What is transaction value? Ans. Transaction value refers to the price actually paid or payable for the supply of goods and or services where the supplier and the recipient are not related and price is the sole consideration for the supply. It includes any amount which the supplier is liable to pay but which has been incurred by the recipient of the supply. Q 3. Are th
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e included in the transaction value? Ans. Yes. However, where the post-supply discount is established as per the agreement which is known at or before the time of supply and where such discount specifically linked to the relevant invoice and the recipient has reversed input tax credit attributable to such discount, the discount is allowed as admissible deduction under Section 15 of the CGST Act. Q 8. Whether pre-supply discounts allowed before or at the time of supply are includible in the transaction value? Ans. No, provided it is allowed in the course of normal trade practice and has been duly recorded in the invoice. Q 9. When are the provisions of the Valuation Rules applicable? Ans. Valuation Rules are applicable when (i) consideration either wholly or in part not in money terms; (ii) parties are related or supply by any specified category of supplier; and (iii) transaction value declared is not reliable. Q 10. What are the inclusions specified in Section 15(2) which could be adde
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supply; and e) Subsidies directly linked to the price excluding subsidies provided by the Central and State Government. Q 11. How will value be determined where supply is made by a dealer dealing in second hand goods? Ans. As per Rule 32(5) of the CGST Rules, 2017, where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, 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 Q 12. How will goods re-possessed from defaulting borrowers be valued? Ans. The proviso to Rule 32(5) of the CGST Rules provides that in case of the purchase value of goods repossessed from an unregistered defaulting borrower, for the purpose of recovery of a loan or debt shall be deemed to be
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share of land, as the case may be Q 14. How will supply of lottery tickets be valued under GST? Ans. Lotteries are sold as goods and can be of following two types: (a) lottery run by State Governments means a lottery not allowed to be sold in any State other than the organizing State. The rate of GST on these is 12% and the face value of the lottery is inclusive of taxes. Therefore, value of supply of lottery shall be 100/112 of the face value or the price notified in the Official Gazette by the organising State, whichever is higher. (b) lottery authorised by State Governments means a lottery which is authorised to be sold in State(s) other than the organising State also. The rate of these is 28% and the face value of the lottery is inclusive of taxes. Therefore, value of supply of lottery shall be 100/128 of the face value or the price notified in the Official Gazette by the organising State, whichever is higher. (Rule 31A (2) of the CGST Rules, 2017). Q 15. How will betting and gambl
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btain such supply at the same time when the supply being valued is made. Q 18. When will open market value become relevant under GST? Ans. Open market value will be relevant in cases where consideration for the supply is not wholly in money. The open market value will be particularly relevant in cases where supply is between related persons, or between distinct persons (entities having same PAN but different GSTIN) and between principal and agent. Q 19. How will value be determined in cases where the consideration for supply is not wholly in money? Ans. Value of supply where the consideration is not wholly in money will be: – a) Open market value of such supply b) if open market value is not available, value shall be 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 value cannot be determined as above, it shall be the value of supply of goods or services or
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nd 29 of the CGST Rules, 2017, then, cost based valuation is applied to determine value of supply. In other words, when a supply does not have money as sole consideration and neither open market value nor consideration involved can be ascertained, then, cost based rule as prescribed in Rule 30 of CGST Rules, 2017 is applied. In such cases, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services. Q 22. What does residual method mean in valuation of supply? Ans. Rule 31 of CGST Rules, 2017 is also known as the residual method of Valuation. Where the value of supply of goods or services or both cannot be determined under Rule 27 to 30, then, the value of supply shall be determined using reasonable means consistent with the principles and general provisions of section 15 and these rules. Q 23. Does the Supplier of service must use the cost method if Rule 27 to 30 are not applicable? A
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istributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. It may be noted that the term person also includes legal persons. Q 25. How will value be arrived at when supply is between related persons or distinct persons as specified in sub-section (4) and (5) of section 25 (other than an agent)? Ans. The value of the supply of goods or services or both in such cases shall, – (a) be the open market value of such supply; (b) if open market value is not available, be the value of supply of goods or services of like kind and quality; (c) if value is not determinable under clause (a) or (b), be the value as determined by application of rule 30 or rule 31, in that order: In case 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 ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a rela
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he recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient; Illustration: Where 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 ₹ 5000 per quintal on the day of supply. Another independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of ₹ 4550 per quintal. The value of the supply made by the principal shall be ₹ 4550 per quintal or where he exercises the option the value shall be 90% of the ₹ 5000 i.e. is ₹ 4500 per quintal. (b) where the value of a supply is not determinable under clause (a), the same shall be determined by application of cost based method as prescribed in Rule 30 or residual method as prescribed in Rule 31 in that order. Q 28. What is a del-credere agent? Ans. A del-credere agent is a selling agent who is engaged by a principal to as
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upplied by the supplier (principal) where DCA is not an agent under Para 3 of Schedule I of the CGST Act? Ans. If the DCA being not an agent under Para 3 of Schedule I of the CGST Act, the temporary short-term transaction based loan being provided by DCA to the buyer is a supply of service by the DCA to the recipient on Principal to Principal basis and is an independent supply. Therefore, the interest being charged by the DCA would not form part of the value of supply of goods supplied (to the buyer) by the supplier. (CBIC Circular No. 73/47/2018-GST dated 5th November, 2018) Q 30. Where DCA is an agent under Para 3 of Schedule I of the CGST Act and makes payment to the principal on behalf of the buyer and charges interest to the buyer for delayed payment along with the value of goods being supplied, whether the interest will form a part of the value of supply of goods also or not? Ans. If the DCA being an agent under Para 3 of Schedule I of the CGST Act, the temporary short-term trans
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ed from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency. In case where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received by the person changing the money. In cases where neither of the currencies exchanged is Indian Rupee, 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 RBI. (b) The person supplying the services can also exercise below mentioned option istead of valuation method mentioned as (a) to ascertain the value: – At the option of supplier of services, the value in relation to supply of foreign currency, including money ch
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f the basic fare in the case of international bookings of passage for travel by air. The expression basic fare means that part of the air fare on which commission is normally paid to the air travel agent by the airline. Q 33. How will services in relation to Life Insurance business be valued? Ans. The value of supply of services in relation to life insurance business shall be: (a) the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder, if such amount is intimated to the policy holder at the time of supply of service; (b) in case of single premium annuity policies other than (a), ten per cent of single premium charged from the policy holder; or (c) in all other cases, twenty-five per cent. of the premium charged from the policy holder in the first year and twelve and a half per cent. of the premium charged from policy holder in subsequent years: It is to be noted that the above rule will not apply where th
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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. Q 35. How will supply of vouchers be valued under GST? Ans. 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 shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp. Q 36. Who is a pure agent for the purpose of GST Valuation? Ans. 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 provided as pure agent of the recipient of supply; (c) does not use for
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