As a general principal, value of supply will be the amount of consideration received in money from the buyer. However, there can be cases when partial consideration is in money and the rest` is in kind. In such scenario, the value of supply shall be computed by applying Rule 27 of GST Rule 2017.
Summary of Rule 27 of GST Rule 2017:
where consideration for a supply is not solely in money, taxable value has to be determined as prescribed in the rules. In such cases following values have to be taken sequentially to determine the taxable value:
- Open Market Value of such supply.
- Total money value of the supply i.e. monetary consideration plus money value of the non-monetary consideration.
- Value of supply of like kind and quality.
- Value of supply based on cost i.e. cost of supply plus 10% mark-up.
- Value of supply determined by using reasonable means consistent with principles & general provisions of GST law. (Best Judgement method)
Open Market Value means the full value of money excluding taxes under GST laws, payable by a person to obtain such supply at the time when supply being valued is made, provided such supply is between unrelated persons and price is the sole consideration for such supply.
Supply of like kind & quality means any other supply made under similar circumstances, is same or closely resembles in respect of characteristics, quality, quantity, functionality, reputation to the supply being valued.
- Where a new phone is supplied for Rs. 20000/- along with the exchange of an old phone and if the price of the new phone without exchange is Rs. 24000/-, the open market value of the new phone is Rs. 24000/-.
- Where a laptop is supplied for Rs. 40000/- 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. 4000/- but the open market value of the laptop is not known, the value of the supply of the laptop is Rs.44000/-.
Rule 27 of GST Rule 2017 (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), 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 (i.e. Cost Method or Residual Method).