Value of Taxable Supply under GST Regime 2017 – Detailed Analysis

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Value of Taxable Supply under GST Regime: 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. now check more details for Value of Taxable Supply under GST Regime

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Value of Taxable Supply under GST Regime

Value of a supply of goods or services or both shall be the transaction value

Transaction value – the price actually paid or payable,

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

In the following situations, the value of supply shall not be the transaction value

  • Consideration is not wholly in money
  • Supplier and related is related
  • Reason to doubt the transactions value
  • Business transaction done by Pure Agent, Insurer, Money Changer, Air travel agent and distributor or selling agent of lottery

value of supply in GST Regime

Related Person in GST Regime

  • such persons are legally recognised partners in business;
  • such persons are employer and employee;
  • any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them;
  • one of them directly or indirectly controls the other
  • both of them are directly or indirectly controlled by a third person;
  • together they directly or indirectly control a third person; or
  • they are members of the same family;

The value of supply shall include-

  • a) any taxes, duties, cesses, fees and charges levied under any law other than CGST/SGST/UTGST/ GST(Compensation to States) Act.;
  • b) any amount the supplier is liable to pay but incurred by the recipient and not included in the price actually paid or payable;
  • c) incidental expenses, including commission and packing, charged by the supplier and
  • d) any amount charged by supplier for anything done at the time of, or before delivery of goods or supply of services;
  • e) interest or late fee or penalty for delayed payment of any consideration for any supply; and
  • f) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation – For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy

Discount allowed to be deducted from the value of supply in the following cases –

a) Discount given before or at the time of the supply and duly recorded in the invoice

b) Discount give after the supply, if–

  • mentioned in the agreement entered into at or before the supply and
  • specifically linked to relevant invoices; and
  • input tax credit related to discount reversed by the recipient.

Value when Consideration not wholly in money

Rule 1: Value of Supply of Goods or services where the consideration is not wholly in money

a) be the open market value of such supply;

b) If open market value is not available; the sum total of

  • i. Consideration in money; and
  • ii. Equivalent amount of money for the consideration not in money, if available at the time of supply

c) If value is not determinable as per above (a) and (b), value of such goods or supply of like kind or quality;

d) If value is not determinable as per above (a), (b) and (c), the sum total of

  • i. Consideration in money; and
  • ii. Equivalent amount of money for the consideration not in money, as determined by rule 4 or 5 in that order.

Value of Goods/ Services – transaction between related / distinct persons other than agent

Rule 2: Value of Supply of Goods or services or both between distinct or related persons, other than an agent, shall

  • a) be the open market value of such supply;
  • b) If open market value is not available; be the value of such goods or supply of like kind or quality;
  • c) If value is not determinable as per above (a) or (b) above , be the value as determined by rule 4 or 5 in that order.

Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services

Value of Goods – made or received through an agent

Rule 3: Value of Supply of Goods between the principal or agent, shall

a) be the open market value of the goods; or

b) At the option of the supplier – 90% of the price charged by the recipient to his customer not being a related person, where the goods are intended to further supply

If value is not determinable as per above (a) or (b) above , be the value as determined by rule 4 or 5 in that order.

Value of Goods/ Services – based on cost

Rule 4: Value of Supply of Goods or services or both based on cost

  • Where the value is not determinable by any of the preceding rules,
  • the value shall be 110% of the cost of production/ manufacture /acquisition of such goods/ provision of such services.

Value of Goods/ Services – Residual Method

Rule 5: Residual method for determination of Value of Supply of Goods or services or both

  • Where the value is not determinable under rules 1 to 4,
  • the same shall be determined using reasonable means consistent with the principles and general provisions of section 15 and these rules:

Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 4.

Valuation of Specific supplies – Money changing

Rule 6(1) : Notwithstanding anything contained in the Act or in these rules, the value in respect of supplies specified below shall be determined in the manner provided hereinafter:

Rule 6(2) : Purchase or sale of foreign currency, including money changing, the value shall be

  • Currency when exchanged from or /to INR – value shall be equal to difference in the buying /selling rate as compared to RBI reference rate
  • In case RBI reference rate not available – 1% of INR received or paid,
  • In case none of the currency involved is INR, – 1% of lesser of the two amounts received by person converting any of the two currencies into INR

Or the person exercise the option as mentioned below (once exercised, shall not be withdrawn during the remaining period)

At the option of supplier of services, the value shall be

  • 1 % of the gross amount of currency exchanged for an amount upto Rs. 1 lacs, subject to minimum of Rs. 250/-
  • Rs. 250/- + 0.5 % of the gross amount of currency exchanged for an amount exceeding Rs. 1 lacs and upto Rs 10 Lacs
  • Rs. 5,000/- + 0.10 % of the gross amount of currency exchanged for an amount exceeding Rs. 10 lacs rupees, subject to maximum of Rs. 60,000/-

Valuation of Specific supplies – Air Travel Agent

Rule 6(3) : In case of services in relation to booking of tickets for travel by air provided by Air Travel Agent, the value shall be

  • Domestic Travel booking – 5% of the basic fare
  • International Travel booking – 10 % of the basic fare

Basic fare means that part of air fare on which commission is normally paid to the air travel agent by the airline.

Valuation of Specific supplies – Life Insurance Business

Rule 6(4) : In case of life insurance services, the value shall be

  • Gross premium charged less the amount allocated for investment or savings, if such amount is intimated to the policy holder.
  • In case of single premium annuity policies other than the above – 10 % of the single premium  In all other cases –
    • 25% of the premium charged in the first year
    • 12.5% of the premium charged in the subsequent years

Provided that nothing contained in this sub-rule shall apply where the entire premium paid towards risk cover in life- insurance (Term plan)

Valuation of Specific supplies – Buying/ selling of second hand goods

Rule 6(5) :

  • where taxable supply is provided by a person
  • dealing in buying and selling of second hand goods, (used goods as such or minor processing which does not change the nature)
  • No input tax credit has been availed on purchases of such goods
  • value shall be –
    • the difference between the selling price and purchase price and
    • If the value is negative, it shall be ignored

Valuation of Specific supplies – Token/ Voucher/ Coupon etc. and Misc.

Rule 6(6) : 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

Rule 6(7) : The value of taxable services provided by such class of service providers as may be notified by the Government on the recommendations of the Council as referred to in Entry 2 of Schedule I between distinct persons as referred to in section 25, other than those where input tax credit is not available under sub-section (5) of section 17, shall be deemed to be NIL.

Valuation of supply of Services – In case of Pure Agent

Rule 7: Notwithstanding anything contained in these rules, the expenditure or costs incurred by the supplier as a pure agent of the recipient of supply of services shall be excluded from the value of supply, if all the following conditions are satisfied, namely:-

Explanation. – For the purposes of this rule, “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 his own interest such goods or services so procured; and
  • d) receives only the actual amount incurred to procure such goods or services

Valuation of supply of Services – In case of Pure Agent

  • i. the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party for the services procured as the contract for supply made by third party is between third party and the recipient of supply;
  • ii. the recipient of supply uses the services so procured by the supplier service provider in his capacity as pure agent of the recipient of supply;
  • iii. the recipient of supply is liable to make payment to the third party;
  • iv. the recipient of supply authorises the supplier to make payment on his behalf; v. the recipient of supply knows that the services for which payment has been made by the supplier shall be provided by the third party;
  • vi. the payment made by the supplier on behalf of the recipient of supply has been separately indicated in the invoice issued by the supplier to the recipient of service;
  • vii. the supplier recovers from the recipient of supply only such amount as has been paid by him to the third party; and viii. the services procured by the supplier from the third party as a pure agent of the recipient of supply are in addition to the supply he provides on his own account.

Rate of exchange of currency – For determination of Value

Rule 8: The rate of exchange for determination of value of taxable goods or services or both shall be the applicable reference rate for that currency as determined by the Reserve Bank of India on the date when point of taxation arises in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act.

Explanation.- For the purposes of this Chapter,-

(a) “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 price is the sole consideration, to obtain such supply at the same time when the supply being valued is made.

(b) “supply of goods or services or both 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 reputation of the goods or services or both first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both.

 

On our website we have provided all the details of GST Act 2017. We hope that our article will be helpful for you to understand the GST Act 2017.

 

Check Also:

The Future Roadmap for Transition to GST Regime

Definition of Supply under GST, Meaning of Supply Under GST

Section 164 of GST – Power of Government to make rules

 

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