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

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

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

Ans. 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.

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

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

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

Ans. 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.

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

Ans. 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.

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 added to Transaction Value?

Ans. The inclusions specified in Section 15 (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.