GOODS AND SERVICE TAX VALUATION – DRAFT RULES
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 29-6-2016
The Central Government has put on the domain the draft rules entitled 'Goods and Service Tax Valuation (Determination of the Value of Supply of Goods and Services) Rules, 2016. These Rules are applicable to the supply of goods and services under the IGST/CGST/SGST.
Transaction value
Rule 2(1) (d) defines the term 'transaction value' as the value of goods and/or services within the meaning of section 15 of the CGST Act. Section 15 of the Model GST Act gives provisions for determining the value of supply.
Section 15(1) of the Act provides that The value of a supply of goods and/or services shall be the transaction value, that is the price actually paid or payable for the said supply of goods and/or services 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) p
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or the CGST Act or the IGST Act;
* incidental expenses, such as, commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before delivery of the goods or, as the case may be, supply of the services;
* subsidies provided in any form or manner, linked to the supply;
* any reimbursable expenditure or cost incurred by or on behalf of the supplier and charged in relation to the supply of goods and/or services;
* any discount or incentive that may be allowed after the supply has been effected; such post-supply discount which is established as per the agreement and is known at or before the time of supply and specifically linked to relevant invoices shall not be included in the transaction value;
The transaction value shall not include any discount allowed before or at the time of supply provided such discount is allowed in the cour
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ristics, quality and reputation as the goods being valued, and perform the same functions or are commercially interchangeable with the goods being valued and supplied by the same person or by a different person.
Services of like kind and quality
Rule 2(1)(C) defines the phrase 'services of like kind and quality' as services which are identical or similar in nature, quality and reputation as the services being valued and supplied by the same person or by a different person.
Methods to determine value
The transaction value shall be the value determined in monetary terms. Where the supply consists of both taxable and non-taxable supply, the taxable supply shall be deemed to be for such part of the monetary consideration as is attributable thereto. The transaction value shall be accepted even where the supplier and recipient of supply are related, provided that the relationship has not influenced the price.
If the goods are transferred from-
* one place of business to another place
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ear to him reasonable, taking into consideration the relevant factors, including-
* difference in the dates of supply;
* difference in commercial levels and quantity levels;
* difference in composition, quality and design between the goods and/or services being valued and the goods and/or services with which they are compared;
* difference in freight and insurance charges depending on the place of supply.
Rule 5 provides that if the value cannot be computed under Rule 4 then it shall be based on a computed value which shall include the following-
* the cost of production, manufacture or processing of the goods or, the cost of provision of the services;
* charges, if any, for the design or brand;
* an amount towards profit and general expenses equal to that usually reflected in supply of goods and/or services of the same class or kind as the goods and/or services being valued which are made by other suppliers.
Where the value of the goods and/or services cannot be determ
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t the same time in comparable quantities in a comparable commercial transaction were assessed;
* the significantly lower or higher value of the supply of goods and/or services compared to the market value of goods and/or services of like kind and quality at the time of supply; or
* any mis-declaration of goods and/or services in parameters such as description, quality, quantity, year of manufacture or production.
The proper officer shall intimate the supplier in writing the grounds for doubting the truth or accuracy of the value declared in relation to the supply of goods and/or services by such supplier and provides a reasonable opportunity of being heard, before taking a final decision. If after hearing the supplier as aforesaid, the proper officer is, for reasons to be recorded in writing, not satisfied with the value declared, he shall proceed to determine the value in accordance with the provisions of rule 4 or rule 5 or rule 6, proceeding sequentially.
Pure Agent
'Pure Age
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ent of service;
* the recipient of service is liable to make payment to the third party;
* the recipient of service authorizes the service provider to make payment on his behalf;
* the recipient of service knows that the goods and/or services for which payment has been made by the service provider shall be provided by the third party;
* the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
* the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
* the goods and/or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
Money changer
The value of taxable service provided for the services in so far as it pertains to purchase or sale of foreign currency, including m
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