1:  What is the value of taxable supply to be adopted for the levy of GST?

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.

2:  What is transaction value?

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.

3:  Are there separate valuation provisions for CGST, SGST and IGST and for Goods and Services?

No, section 15 is common for all three taxes and also common for goods and services.

4:  Is contract price not sufficient to determine valuation of supply?

Contract price is more specifically referred to as ‘transaction value’ and that is the basis for computing tax. However, when the price is influenced by factors like relationship of parties or where certain transactions are deemed to be supply, which do not have a price, the value has to be determined in accordance with the GST Valuation Rules.

5:  Is reference to GST Valuation Rules required in all cases?

No. Reference to GST Valuation Rules is required only in cases where value cannot be determined under sub-section (1) of Section 15.

6:  Can the transaction value declared under section 15(1) be accepted?

Yes, it can be accepted after examining for inclusions in section 15(2). Furthermore, the transaction value can be accepted even where the supplier and recipient are related, provided the relationship has not influenced the price.

7:  Whether post-supply discounts or incentives are to be included in the transaction value?

Yes. 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 model GST law.

8:  Whether pre-supply discounts allowed before or at the time of supply are includible in the transaction value?

No, provided it is allowed in the course of normal trade practice and has been duly recorded in the invoice.

9:  When are the provisions of the Valuation Rules applicable?

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.

10:  What are the inclusions specified in Section 15(2) which could be added to Transaction Value?

The inclusions specified in Section15 (2) which could be added to transaction value are as follows:
a) Any taxes, duties, cesses, fees and charges levied under any statute, other than the SGST/CGST Act and the Goods and Services Tax (Compensation to the States for Loss of Revenue) Act, 2016, if charged separately by the supplier to the recipient;
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 and/or services;
c) 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;
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 and State Government.

11:  Under which section does value of taxable supply in GST is governed?

Section 15 of the CGST Act, 2017 read with CGST Rules, 2017 covers the provisions with respect to transaction value.

12:  Whether valuation provisions is same for supplies of Goods or Services or both attracting CGST, SGST and IGST?

Yes, section 15 is common for all three taxes and also common for goods and services.

13:  Is there any different valuation mechanism provided for composite supplies and mixed supplies?

No, section 15 along with the rules prescribed for valuations are common for supply of goods and/ or services and also for composite supplies and mixed supplies.

14:  Are the valuation provisions similar for both inter-State and intra-State supplies?

Yes, Section 15 is common for all supplies.

15:  Will the Section 15 read with Chapter IV of the CGST Rules, 2017 be applicable on import of goods where IGST is payable?

No, Customs Law will be applicable for valuation of imported goods.

16:  Will the Customs Valuation apply to IGST payable on import of services?

No, Customs Law is applicable only for valuation of imported goods. Section 15 read with Chapter IV of the CGST Rules, 2017 shall be applicable for valuation of import of services.

17:  What is taxable supply under GST regime?

As per sub- section (108) of section 2 of CGST Act, 2017, “taxable supply” means a supply of goods or services or both which is leviable to tax under this Act;

18:  How to determine the value of supplies for levy of GST?

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.

19:  What will be the value of taxable supply?

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.

20:  On what conditions ‘Transaction Value’ shall be considered as ‘Value of Supply’ under GST?

As per the provisions of the section 15 (1) if following conditions are satisfied, the value of a supply of goods or services or both shall be the transaction value:

• The supplier and the recipient of the supply are not related and
• The price is the sole consideration for the supply.

21:  What is the meaning of the term ‘Price is not the sole consideration’?

Under the GST law, consideration can be in “money or otherwise”, and also includes the monetary value of an act or forbearance, in relation to a supply. Consideration may also flow from any person other than the recipient. In cases, where the money received in respect of the supply is not the sole consideration, the “price is not the sole consideration”. E.g. Buyer of capital goods discharges the loan of seller, goods purchased on exchange offer, etc.

22:  What are basic features of Valuation under GST?

Following are the basic characteristics of Valuation under GST:

1. Tax is levied on value of supply of goods and services.
2. Consideration for the supply need not necessarily be wholly in money.
3. In General, value of supply is equal to transaction value.
4. However, if the supplier and recipient are related, then transaction value shall be computed as per CGST Valuation Rules, 2017.

23:  When supplier and recipient shall be considered as related person?

As per explanation to sub- section 5 of section 15 of CGST Act, 2017, 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 recognised partners in business;

(iii) Such persons are employer and employee;

(iv) Any person directly or indirectly own 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;

However, persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, of the other, they shall be deemed to be related.

24:  Is it mandatory that consideration for supply should be in monetary terms?

No, it is not mandatory that consideration for supply should be in monetary terms. It can be in kind also. However, in such case, transaction value shall be ascertained as per Rule 27 of CGST Rules, 2017.

25:  How assessable value shall be computed in case value of supplies is not wholly in money?

As per Rule 27 of CGST Rules, 2017, where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall be either of the following:

(a) The open market value of such supply;

(b) In case, 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 the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality;

26:  How to calculate value of supplies when transaction is held between related parties?

Transactions between related parties shall be valued at ‘open market value’. However, in absence of open market value the value of identical or similar goods shall be considered.

27:  What is meaning of expression “open market value”?

The expression “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.

28:  How to determine value of supply of goods which is made or received through an agent?

As per Rule 29 of CGST Rules, 2017, the value of supply of goods between the principal and his agent shall be the open market value of the goods being supplied. However, where the goods are intended for further supply by the said recipient, value of such supply, only at the option of the supplier, can be ninety per cent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person.

29:  Can value be ascertained on basis of cost to supplier?

Where the value cannot be ascertained by specific rules prescribed, the value shall be one hundred and ten per cent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services.

30:  How to calculate value of supply of services provided by an air travel agent in relation to booking of tickets for travel by air?

As per sub- rule 3 of Rule 32 of CGST Rules, 2017, the value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be an amount calculated at the rate of five per cent of the basic fare in the case of domestic bookings, and at the rate of ten per cent of the basic fare in the case of international bookings of passage for travel by air.           

31:  What shall be value of taxable supply in case of supply related to second- hand goods?

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. However, where the value of such supply is negative, it shall be ignored.

32:  Who is ‘pure agent’ in GST regime?

The expression “pure agent” means a person who has following characteristics:

(a) He 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) He 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;

(c) He does not use for his own interest such goods or services so procured; and

(d) He receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

33:  What conditions are required to be complied, to exclude expenditure incurred by a supplier as a pure agent of the recipient of supply, while computing value of supply of services in case of pure agent?

The expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely:

(i) 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;

(ii) 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

(iii) 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.

34:  Whether discounts given to recipient of supply, before or at time of supply, be allowed as deduction from value of taxable supply?

No, as per sub- rule 3 of Rule 15 of CGST Act, 2017, the value of the supply shall not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply.

35:  How value of supply shall be computed where transaction value is inclusive of integrated tax, central tax, State tax, Union territory tax?

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 in the following manner, namely,-

Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the case may be, CGST,             

SGST or UTGST) ÷  (100+ sum of tax rates, as applicable, in %)