GST – GST Law and Procedure – 029 – Chapter Twenty Nine Valuation in GST Value of Supply Every fiscal statue makes provision for determination of value as tax is normally payable on ad-valorem basis. In GST also, tax is payable on ad-valorem basis i.e. percentage of value of the supply of goods or services. Section 15 of the CGST Act and Rule 27 to Rule 35 of CGST Rules, 2017 (Chapter IV – Determination of Value of Supply), contain provisions related to valuation of supply of goods or services made in different circumstances and to different persons. Transaction Value Under GST law, taxable value is the transaction value i.e. price actually paid or payable, provided the supplier & the recipient are not related and price is the sole consideration. In most of the cases of regular normal trade, invoice value will be the taxable value. However, to determine value of certain specific transactions, Determination of Value of Supply rules have been prescribed in CGST Rules, 2017. Compulso
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to the discounts is reversed by the recipient. Taxable value when consideration is not solely in money In some cases, where consideration for a supply is not solely in money, taxable value has to be determined as – prescribed in the rules. In such cases following values have to be taken sequentially to determine the taxable value: – i. Open Market Value of such supply. ii. Total money value of the supply i.e. monetary consideration plus money value of the non-monetary consideration. iii. Value of supply of like kind and quality. iv. Value of supply based on cost i.e. cost of supply plus 10% mark-up. v. Value of supply determined by using reasonable means consistent with principles & general provisions of GST law. (Best Judgement method) Open Market Value means the full value in money excluding taxes under GST laws, payable by a person to obtain such supply at the time when supply being valued is made, provided such supply is between unrelated persons and price is the sole consider
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company etc. Under GST law various categories of related persons have been specified and as relation may influence the price between two related persons therefore special valuation rule has been framed to arrive at the taxable value of transactions between related persons. In such cases following values have to be taken sequentially to determine the taxable value: – i. Open Market Value ii. Value of supply of like kind and quality. iii. Value of supply based on cost i.e. cost of supply plus 10% mark-up. iv. Value of supply determined by using reasonable means consistent with principles & general provisions of GST law. (Best Judgement method) However if the recipient is eligible for full input tax credit, the invoice value will be deemed to be the open market value. 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
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to determine the taxable value: – i. Value of supply based on cost i.e. cost of supply plus 10% mark-up. i. Value of supply determined by using reasonable means consistent with principles & general provisions of GST law. (Best Judgement method) Value of supply of services in case of a Pure Agent Subject to fulfilment of certain conditions, the expenditure and costs incurred by the supplier as a pure agent of the recipient of supply of service has to be excluded from the value of supply. Illustration 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 Registrar of the Companies. The fees charged by the Registrar of the companies 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 d
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s of foreign currency. However if RBI reference rate for a currency is not available then taxable value is 1% of the gross amount of Indian Rupees provided/received by the person changing the money. Case 2: Transaction where neither of the currencies exchanged is Indian Rupees Taxable value will be 1% of the lesser of the two amounts the person changing the money would have received by converting (at RBI reference rate) any of the two currencies in Indian Rupees. Option-2 The person supplying the service may also exercise the following option to ascertain the taxable value, however once opted then he cannot withdraw the during the remaining part of the financial year: – One percent of the gross amount of currency exchanged for an amount up to one lakh rupees, subject to minimum amount of two hundred and fifty rupees. One thousand rupees and half of a percent of the gross amount of currency exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees. Five thousand rupees
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such allocation is intimated to the policy holder at the time of collection of premium. Single premium annuity policy where allocation for investments and savings is not intimated to the policy holder – taxable value is ten percent of the single premium charged from the policy holder. Other cases- Twenty five percent of premium charged from the policy holder in the first year and twelve and a half percent of premium charged for subsequent years. However, where insurance policy has benefit of risk coverage only, then taxable value is entire premium charged from the policy holder. Special provision related to determination of value of second hand goods The taxable value of supply of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of goods shall be the difference between the purchase price and the selling price, provided no input tax credit has been availed on purchase of such goods. However, if the selling price is less than purc
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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. Value of taxable services provided by a notified class of service providers as referred to in para 2 of schedule 1 between the distinct persons The taxable value is deemed to be Nil wherever input tax credit is available. Valuation of certain works contract services (i) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. In case of supply of service mentioned above, involving transfer of property in land or undivided share of land, as the case may be, the value
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