Value of taxable supply: Section 15 of GST Act

Section 15: Value of taxable supply:

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.

Hence, we can say that value of taxable supply will be the transaction value if the following two condition are satisfied:

1. Supplier & Recipient are not related (Explain Below)
2. Price is the sole consideration for the supply (Explain Below)

The value of supply shall include: –

1. Any taxes, duties, cesses, fees and charges levied under any law other than GST law, if charged separately by the supplier;
2. 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;
3. Incidental expenses, including commission, packing and any other expenses, charged by the supplier to the recipient at the time of, or before delivery of goods or supply of services;
4. Interest or late fee or penalty for delayed payment of any consideration for any supply; and
5. Subsidies directly linked to the price will form part of transaction value but Subsidies provided by the Central and State Governments will not be covered.

The value of the supply shall not include: –

There are two types of discount which is required to be excluded from the value of supply.

Discount given on or before supply: – Any discount which is duly recorded in the invoice and given before the time of supply is required to be excluded from the value of taxable supply.

Discount given after the supply (Post supply discount): – Any discount which is given after the supply however such discount is already decided as per the agreement between supplier and the recipient before the time of supply and recipient has reversed the input tax credit on the value of discount then such discount value is required to be excluded from the value of taxable supply.

Value cannot be determined as per the provisions (Valuation Rule Link Provide as Under)

When it is not possible to calculate value of supply as per section 15 due to related party transaction or price not being the only or the sole consideration. The value of taxable supply is to be calculated as per the chapter IV of CGST Rules, 2017.

Explanation:

A. Supplier & Recipient are not related:

Supplier and recipient should not be related party. Definition of related party is as below:

1.  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 twenty-five per cent 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;

2.  the term “person” also includes legal persons;

3.  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.

B. Price is the sole consideration for the supply:

Price will be sole consideration if it is on the arm length price. It means if the price charged which is equivalent to Open Market Value or Fair Market Value then the same will be sole consideration.

Valuation Rule of GST Act 2017:

1.   Rule 27 of GST Rule 2017 (Value of supply of goods or services where the consideration is not wholly in money

2.  Rule 28 of GST Rule 2017: Value of supply of goods or services or both between distinct or related persons, other than through an agent

3.  Rule 29 of GST Rule 2017: Value of supply of goods made or received through an agent

4.  Rule 30 of GST Rule 2017: Value of supply of goods or services or both based on cost

5. Rule 31 of GST Rule 2017.Residual method for determination of value of supply of goods or services or both