Indirect
Taxation
Goods
and Services Tax
Value of Supply
Section 15 of the CGST Act, 2017
(1) The value of supply shall be the
transaction value
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.
(2) The
value of supply shall include:-
(a)
Any taxes, duties, cesses, fees and charges levied
under any law for the time being in force other than
CGST/SGST/UTGST/IGST/Compensation Cess, if charged separately by
the supplier;
(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 or services or both;
(c)
Incidental expenses, including
commission and packing, charged by the supplier to the recipient of a supply 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;
(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 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.
(3) The value of the supply shall not include any
discount which is given:-
(a) Before or at the time of the supply if such discount has been duly recorded in the invoice
issued in respect of such supply; and
(b) After the supply has been affected, if—
i)
Such discount is established in terms of an agreement
entered into at or before the time of such supply and specifically linked to
relevant invoices; and
ii)
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.
(4) 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.
(5) Notwithstanding
anything contained in sub-section (1) or sub-section (4), the value of such
supplies as may be notified by the Government on the recommendations of the Council
shall be determined in such manner as may be prescribed.
Explanation -
For the purposes of
this Act,–
(a)
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, owns, controls, or
holds 25% 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;
(b) the
term “person” also includes legal persons;
(c) persons
who are associated in the business of one another in that one is the sole agent
or sole distributor or sole concessionaire, howsoever described, of the other,
shall be deemed to be related.
RULES FOR DETERMINATION OF
VALUE OF SUPPLY
27. Value
of supply of goods or services where the consideration is not wholly in money:-
Where the
supply of goods or services is for a consideration not wholly in money, the value
of the supply shall –
(a)
be the open market
value of such supply;
(b)
if the open market value is not available under clause
(a), 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;
(d)
If the value is not determinable under clause (a) or
clause (b) or clause (c), the value shall be the sum total of consideration in
money and such further amount in money that is equivalent to consideration not
in money as determined by the application of rule 30 or rule 31 in that order.
Illustration:
(1)
Where a new phone is supplied for Rs 20,000 along with
the exchange of an old phone and if the price of the new phone without exchange
is Rs 24,000, the open market value of the new phone is Rs 24,000.
(2)
Where a laptop is supplied for Rs 40,000 along with
the barter of a printer that is manufactured by the recipient and the value of
the printer known at the time of supply is Rs 4,000 but the open market value
of the laptop is not known, the value of the supply of the laptop is Rs 44,000.
28. Value
of supply of goods or services or both between distinct or related persons,
other than through an agent:-
The value of
the supply of goods or services or both between distinct persons as specified
in sub-section (4) and (5) of section 25 or where the supplier and recipient are
related, other than where the supply is made through an agent, shall –
(a)
be the open market value of such supply;
(b)
if the open market value is not available, be the
value of supply of goods or services of like kind and quality;
(c)
if the value is not determinable under clause (a) or
(b), be the value as determined by the application of rule 30 or rule 31, in
that order:
Provided that,
Where
the goods are intended for further supply as such by the recipient, the value shall,
at the option of the supplier, be an amount equivalent to 90% 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:
Provided
further that,
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 the goods or services.
29. Value of supply of goods made or received
through an agent:-
The value of
supply of goods between the principal and his agent shall –
(a)Be
the open market value of the goods being supplied, or at the option of the
supplier, be 90% 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, where the
goods are intended for further supply by the said recipient.
Illustration:
A principal
supplies groundnut to his agent and the agent is supplying groundnuts of like
kind and quality in subsequent supplies at a price of Rs 5,000 per quintal on
the day of the supply. Another independent supplier is supplying groundnuts of like
kind and quality to the said agent at the price of Rs 4,550 per quintal. The
value of the supply made by the principal shall be Rs 4,550 per quintal or
where he exercises the option, the value shall be 90% of Rs 5,000 i.e., Rs
4,500 per quintal.
(b)
Where the value of a supply is not determinable under
clause (a), the same shall be determined by the application of rule 30 or rule
31 in that order.
30. Value of supply of goods or services or both
based on cost:-
Where the value
of a supply of goods or services or both is not determinable by any of the
preceding rules of this Chapter, the value shall be
110% of the cost of production or manufacture or the cost of acquisition of
such goods or the cost of provision of such services.
31. Residual method for determination of value of
supply of goods or services or both:-
Where the value
of supply of goods or services or both cannot be determined under rules 27 to
30, the same shall be determined using reasonable means consistent with the
principles and the general provisions of section 15 and the provisions of this Chapter:
Provided that, in the case of
supply of services the supplier may opt for this rule ignoring rule 30.
31A.
Value of supply in case of lottery, betting, gambling and horse racing:–
(1)
Notwithstanding
anything contained in the provisions of this Chapter, the value in respect of
supplies specified below shall be determined in the manner provided
hereinafter.
(2)
The
value of supply of lottery shall be deemed to be 100/128 of the face value of
ticket or of the price as notified in the Official Gazette by the Organising State, whichever is higher.
(3)
The
value of supply of actionable claim in the form of chance to win in betting,
gambling or horse racing in a race club shall be 100% of the face value of the
bet or the amount paid into the totalizator.
32. Determination of value in respect of certain
supplies:-
(1) Notwithstanding anything contained in the provisions of this
Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determined
in the manner provided hereinafter.
(2) The value of
supply of services in relation to the purchase or sale of foreign currency, including
money changing, shall be determined by the supplier of services in
the following manner, namely:-
(a) For a currency,
when exchanged from, or to, Indian Rupees, the value shall be equal to
the difference in the buying rate or the selling rate, as the case may be, and the
Reserve Bank of India reference rate for that currency at that time, multiplied
by the total units of currency:
Provided that, in case where
the Reserve Bank of India reference rate for a currency is not available, the
value shall be 1% of the gross amount of Indian Rupees provided or received by
the person changing the money:
Provided
further that, in case where neither of the currencies exchanged is Indian
Rupees, the value shall be equal to 1% of the lesser of the two
amounts the person changing the money would have received by converting any of
the two currencies into Indian Rupee on that day at the reference rate provided
by the Reserve Bank of India.
Provided also
that, a person supplying the services may exercise the
option to ascertain the value in terms of clause (b) for a financial year and
such option shall not be withdrawn during the remaining part of that financial
year.
(b) At the
option of the supplier of services, the value in relation to the supply of foreign currency,
including money changing, shall be deemed to be-
i. 1% of the gross amount of currency exchanged
for an amount up to Rs 1 Lakh, subject to a minimum amount of Rs 250;
ii. Rs 1,000 and ½ % of the gross amount of
currency exchanged for an amount exceeding Rs 1 Lakh and up to Rs 10 Lakh; and
iii.
Rs
5,500 and 1/10th of 1% of the gross amount of currency exchanged for
an amount exceeding Rs 10 Lakh, subject to a maximum amount of Rs 60,000.
(3) 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 5% of the basic fare in the case of domestic bookings, and at the
rate of 10% of the basic fare in the case of international bookings of passage
for travel by air.
Explanation -
For the
purposes of this sub-rule, the expression “basic fare” means that part of the air
fare on which commission is normally paid to the air travel agent by the
airlines.
(4) The value of
supply of services in relation to life insurance business shall be -
(a) the gross premium charged from a
policy holder reduced by the amount allocated for investment, or savings on
behalf of the policy holder, if such an amount is intimated to the policy
holder at the time of supply of service;
(b) In case of single premium
annuity policies, other than (a) above, 10% of single premium charged from the
policy holder; or
(c) In all other cases, 25% of the
premium charged from the policy holder in the first year and 12½% of the
premium charged from the policy holder in subsequent years:
Provided that, nothing
contained in this sub-rule shall apply where the entire premium paid by the
policy holder is only towards the risk cover in life insurance.
(5) 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
and where the value of such supply is negative, it shall be ignored:
Provided that, the purchase value of goods repossessed from a defaulting
borrower, who is not registered, for the purpose of recovery of
a loan or debt shall be deemed to be the purchase price of
such goods by the defaulting borrower reduced by 5% points for every quarter or
part thereof, between the date
of purchase and the date of disposal by the person making such repossession.
(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.
(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 paragraph
2 of Schedule I of the said Act between distinct persons as referred to in section
25, where input tax credit is available, shall be deemed to be NIL.
33. Value of supply of services in case of pure
agent:-
Notwithstanding anything contained in the provisions of this Chapter, 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:
(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.
Explanation –
For the
purposes of this rule, the expression “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 supplied 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 in addition to the amount received for supply he provides
on his own account.
Illustration:
Corporate
services firm A is engaged to handle the legal work pertaining to the incorporation
of Company B. Other than its service fees, A also recovers from B, registration
fee and approval fee for the name of the company paid to the Registrar of Companies.
The fees charged by the Registrar of Companies for the registration and approval
of the name are compulsorily levied on B. A is merely acting as a pure agent in
the payment of those fees. Therefore, A’s recovery of such expenses is a
disbursement and not part of the value of supply made by A to B.
34. Rate
of exchange of currency, other than Indian rupees, for determination of value:-
The rate of
exchange for the determination of the 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.
35. Value
of supply 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 %)
Explanation
–
For the
purposes of the provisions of this Chapter, the expressions-
(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 the 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 the 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.
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