1. Valuation of Goods and/or Services
“A detailed analysis under GST regime”
CA Rubneet Anand
B.Com, M.Com(Finance& Taxation), MBA(Finance & International Business- IMT Ghaziabad)
Assistant Manager (Internal Audit & Indirect Taxation)-M/s SML Isuzu Ltd
Facebook Page- Corporate Prism-Consultation in Accounting & Corporate Management

2. Introduction Under the GST regime Under the existing Tax structure
— Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 — Customs Valuation (Determination of Price of Export Goods) Rules, 2007 — Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 — Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 — Service Tax (Determination of Value) Rules, 2006
- Central Goods & Services Act Chapter IV, Section 15 - Integrated Goods and Services Tax Act 2017-Chapter IX, Section 20 - Goods and Services Tax Rules- Determination of Value of Supply

3. Value of Goods/ and Services
Existing Vs. GST
Value of Goods/ and Services
Excise
VAT
Service Tax
GST
Sale Value
Taxable Value
Assessable Value / MRP
Transaction Value

4. Value of a taxable supply under GST Transaction Value
As per Sec 15(1) of the CGST Act 2017,
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.
Main Conditions for the applicability of Sec 15(1)
It is “applicable” to both goods and services
Transaction value is the “price” of the goods/ services
Price is the only form of “consideration”
The transaction should be between “unrelated parties”

5. Inclusions and Exclusions in the Value of Supply Sec 15(2&3) of the CGST Act 2017
Specific Inclusions-Sec 15(2)
Specific Exclusions- Sec 15(3)
any taxes, duties, cesses, fees/ charges levied under any law in force other than GST , if charged separately by the supplier
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 or services or both
incidental expenses, including commission and packing, and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services
interest or late fee or penalty for delayed payment of any consideration for any supply
subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments
Note- the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy
The value of the supply shall not include any discount which is given
Before or at the time of the supply
After the supply has been effected
Conditions to be satisfied for exclusion
discount recorded in the invoice issued in respect of such supply
discount is established in terms of an agreement entered into at or before the time of such supply
specifically linked to relevant invoices
input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply

6. Explanation
Inclusion of Taxes- any taxes, duties, cesses, fees/ charges levied under any law in force other than GST , if charged separately by the supplier
Example- If the value of the goods(say cigarettes) includes both GST and excise duty, then for calculating transaction value under Sec 15(2a), the value of excise duty will be included and value of GST will not be included
Supplier is liable to pay amount- 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 or services or both
Example-Where transportation has been arranged by the supplier & contract terms are Ex- Works and freight outward or any expenditure upto destination of recipient has been directly paid by the recipient to the transporter, then freight outward etc will not be included in the transaction value of the supply because supplier is not liable to pay these expenses

7. Explanation
Incidental expenses-including commission and packing, and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services
Example- Apple Inc sold an I-Phone to the customer for Rs /- and Customer asked for special type of packing worth Rs. 3400/-, delivery to directly to the customer address for which Apple Inc charged separately Rs. 800/-. Then Rs will be the transaction value for levy of GST.
Interest or late fee or penalty for delayed payment of any consideration for any supply
Example-X & Y are non related persons, X has raised an invoice on Y for Rs. 12 lacs for the sale of truck. The payment was to be made by the stipulated timeline say within 30 days of the raising of invoice, but Y made the payment after 30 days. X charged Y with late payment 10 %, hence the transaction value would be Rs lacs.

8. To be included in the transaction value
Explanation
Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments
Example-
Cases
To be included in the transaction value
Subsidy received from Central Govt/ State Govt for setting up factory by Pepsi
Subsidy received from NGO for setting up of factory by Pepsi
Subsidy received from Central/ State Govt for setting up Factory as well as for the per unit cost price of Lays by Pepsi
Subsidy received from NGO for setting up of factory by Pepsi as well as for per unit cost price of Lays by Pepsi
Subsidy received from Central Govt/ State Govt for per unit cost price of Lays by Pepsi
Subsidy received from NGO for per unit cost price of Lays by Pepsi

9. Determination of Value of Supply Rules
As per Sec 15(4) of the CGST Act 2017,
Where the value of the supply of goods or services or both cannot be determined under sub- section (1), the same shall be determined in such manner as may be prescribed.
These rules are to be applied in case any of the following condition arises-
The price is not the sole consideration for the supply made as per Sec 7 of CGST Act 2017
The consideration is not wholly in money i.e. supply as per schedule 1 of CGST Act 2017
The supplier and recipient are related persons as per the explanation to Sec 15

10. Determination of Value of Supply Rules1
Where the consideration is not wholly in money 2
Supply is between distinct/related persons, other than through an agent 3
Supply made or received through an agent 4
Supply based on cost 5
Residual method 6
Determination of value in respect of certain supplies 7
Value of supply of services in case of pure agent 8
Rate of exchange of currency, other than Indian rupees, for determination of value 9
Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax

11. Explanation
Rule 1-Value of supply of goods or services where the consideration is not wholly in money
Applicable when
Consideration partly in money and partly in kind
Consideration wholly in kind
Exchange offers/ Barter System
Value to be ascertained in the sequential order stated below
Open market value of such supply
If a is not available
b. Consideration in money + equivalent amount of the consideration not in money
If b is not available
c. Value of like kind and quality goods/ services
If c is not available
d. Consideration in money + equivalent amount of consideration not in money as determined under Rule 4 or 5

12. Explanation
Rule 2-Value of supply of goods or services or both between distinct or related persons, other than through an agent
Applicable when
Transaction is between distinct persons as per Sec 25(4&5)/ related persons
Distinct persons will have the same PAN
Related persons are not the agents
Price is the sole consideration
If the goods are not intended for further sale
Value to be ascertained in the sequential order stated below
a. Consideration in money + equivalent amount of the consideration not in money
If a is not available
b. Value of like kind and quality goods/ services
If b is not available
c. Consideration in money + equivalent amount of consideration not in money as determined under Rule 4 or 5
If c is not available

13. Proviso to Rule 2- applicable only to Goods
Further sale of goods-Where “goods” are intended for “further supply” by the “recipient” to a “non related person”, then the supplier may exercise his right to value the of the price charged for the goods of like kind & quality
For example-
HO sells the goods to its branch office for Rs lacs/- and for Rs. 1 lacs directly to its customers. In this case the transaction value will be Rs. 1 lacs
If “these” goods “as such” are sold by branch to customer for Rs. 1 lacs, & similar type of goods are sold to another customer for Rs. 1.5 lacs, then HO may decide to value these of Rs. 1.5 lacs.
Recipient is eligible for “Full” Input Tax Credit- value declared in the invoice shall be deemed to be the open market value of goods or services

14. Explanation
Rule 3-Value of supply of goods made or received through an agent
Applicable when
Agent of the supplier is supplying the goods/ services to the customer
Price is the sole consideration
Value to be ascertained in the sequential order stated below
Open market value of such supply
If c is not available
b. As determined under Rule 4 or 5

15. Explanation
Rule 4-Value of supply of goods or services or both based on cost
Applicable when
Value of supply is not determinable under any of the preceding rules 1-3
Value to be 110% of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services.
Rule 5-Residual method for determination of value of supply of goods or services or both
Value of supply is not determinable under any of the preceding rules 1-4
Value to be ascertained using reasonable means consistent with the principles and general provisions of section 15 and these rules
Proviso to Rule 5-The sequential order can be broken in case of determination of value of services i.e. the value may directly be derived using Rule 5 if it is not determinable as per Rule 1-3.

16. International bookings
Explanation
Rule 6-Determination of value in respect of certain supplies
1. Value of supply of services in relation to purchase or sale of foreign currency, including money changing
Option 1
For a currency, when exchanged from, or to, Indian Rupees (INR),
Option 2
Value in relation to supply of foreign currency, including money changing
Total units of currency *(Difference in the buying/ selling rate & RBI reference rate)
Separate provisions have been given in case RBI reference rate is not available
2. Value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent
Domestic bookings
International bookings
5% of the basic fare
10% of the basic fare

17. Explanation
Rule 6-Determination of value in respect of certain supplies
3. Value of supply of services in relation to Life Insurance Business
Amount is intimated to the policy holder at the time of supply of service
Investment/ savings amount less amount of Gross Premium charged
Single Annuity policies other than above
10% of the single premium charged from the policy holder
Other cases-where the entire premium paid by the policy holder is not only towards the risk cover in life insurance
1st year- 25% of the premium charged
Subsequent years- 12.5%
4. Buying and selling of second hand goods
Conditions-
a. Goods supplied as such
b. Goods supplied after minor processing , not changing the nature of the goods
c. no input tax credit has been availed on purchase of such goods
Taxable Value of supply=Selling Price less Purchase Price (negative value to be ignored)

18. Explanation
Rule 6-Determination of value in respect of certain supplies
5. Goods Repossessed from a unregistered defaulting borrower for recovery of loan/ debt
Taxable Value of supply=Purchase price of such goods less 5% points for every quarter between the date of purchase and the date of disposal by the person making such possession
6. Value of redeemable token/ voucher/coupon/stamp(other than postage stamp)
Taxable Value of supply=money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.
7. Service Providers to be notified by the Govt as referred to in paragraph 2 of Schedule I between distinct persons as referred to in section 25
Taxable Value of supply=NIL

19. Explanation Rule 7-Value of supply of services in case of pure agent
Applicable when all the three conditions are satisfied
Supplier is the pure agent of the recipient
Payment made to third party is specifically indicated in the invoice issued by pure agent
Supplies procured as a pure agent are in addition to his own supplies
Taxable Value of Supply-Value of Supply less expenditure or costs incurred by a supplier as a pure agent of the recipient
Rule 8-Rate of exchange of currency, other than Indian rupees, for determination of value
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 of time of supply in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act.
Rule 9-Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax
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 %)

20. CA Rubneet Anand
B.Com, M.Com(Finance& Taxation), MBA(Finance & International Business- IMT Ghaziabad)
Assistant Manager (Internal Audit & Indirect Taxation)-M/s SML Isuzu Ltd
Facebook Page- Corporate Prism-Consultation in Accounting & Corporate Management