{"id":29487,"date":"2021-04-29T14:13:18","date_gmt":"2021-04-29T08:43:18","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=29487"},"modified":"2021-04-29T14:13:20","modified_gmt":"2021-04-29T08:43:20","slug":"valuation-rule-for-supply-under-goods-and-services-tax","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/valuation-rule-for-supply-under-goods-and-services-tax\/","title":{"rendered":"Valuation Rule for Supply under Goods and Services Tax"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Every taxable person is responsible to pay tax on ad-valorem basis\nmeaning \u201caccording to the value\u201d the person is taxed based on the value of\ntransaction or a property. Every individual liable to pay tax has to pay GST on\nboth for supply of goods or services and the value for the same has to be decided\nin accordance with section 15 of the&nbsp;<strong>CGST Act, 2017<\/strong>. <\/p>\n\n\n\n<p>Therefore, Valuation Rule for Supply under <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>Goods and Services Tax<\/strong><\/a> is under GST Law to determine the Transaction Value on which the taxable person shall pay the tax.&nbsp;Thus, at present the GST will be charged on the valuation of supply. The price actually paid for the supply of goods and services involving un-related parties i.e., price is the only consideration in the Transaction value.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What is the Valuation Rule for Supply under GST?<\/h3>\n\n\n\n<p>The <strong>section 15<\/strong> of the Central Goods and\nServices Tax Act and CGST&nbsp;Rules, 2017&nbsp;on\nDetermination of&nbsp;Value&nbsp;of Supply provides which is related to&nbsp;the valuation for\nsupply of goods or services made in different circumstances and to different\npersons.<\/p>\n\n\n\n<p>In cases where the consideration is not completely in money\nthen the value of supply of goods or services shall, be the open market value of such supply:-<\/p>\n\n\n\n<ul><li><strong>The total sum of consideration\nin money if the open market value is not available &#8211; <\/strong>if\nsuch amount is known at the time of supply then any such additional amount in\nmoney as is equal to the consideration which is not in money,<\/li><li><strong>The value of supply of goods or\nservices or for both of similar&nbsp; quality\nand kind &#8211;&nbsp; <\/strong>in case where the\nvalue of supply is not determinable under clause (a) or clause (b),&nbsp;<\/li><li><strong>The consideration of total sum\nof in money<\/strong> \u2013 where the value is not determinable\nunder any of the clauses (a), (b) or (c). <\/li><\/ul>\n\n\n\n<p><strong><em>For example<\/em><\/strong>:- Where a new laptop is supplied for Rs. 20000 but together with the exchange of an old laptop and if the price of the new laptop without exchange is Rs. 24000 then the value of the new laptop in the open market is Rs. 24000.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/gst-returns-reflecting-in-your-income-tax-passbook-form-26as\/\">GST Returns Reflecting in your Income Tax Passbook (Form 26AS)<\/a><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Things\nto be Considered while Applying Valuation Rules<\/h3>\n\n\n\n<p><em><strong>There are three things that shall be taken into consideration while valuation of tax under GST:-<\/strong><\/em><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"1000\" height=\"424\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Things-to-be-Considered-while-Applying-Valuation-Rules.png\" alt=\"Things to be Considered while Applying Valuation Rules\" class=\"wp-image-29503\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Things-to-be-Considered-while-Applying-Valuation-Rules.png 1000w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Things-to-be-Considered-while-Applying-Valuation-Rules-300x127.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Things-to-be-Considered-while-Applying-Valuation-Rules-768x326.png 768w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">i) Transaction Value<\/h3>\n\n\n\n<p>According to GST, the taxable value is regarded as the transaction\nvalue. In simple words, transaction value under GST shall be the value paid by\nthe buyer to the supplier.<\/p>\n\n\n\n<p>But it is equally imperative to note here that the price is\nthe sole consideration and the supplier and buyer shall not be related persons.\nThough, for some special cases the transaction value has to be determined in\naccordance with the CGST Rules, 2017.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">ii) Compulsory Inclusions<\/h3>\n\n\n\n<p><em><strong>This will provide some key things that shall form a part at the time of valuation compulsorily:-<\/strong><\/em><\/p>\n\n\n\n<ul><li>Any taxes, charged or fees imposed under any different law besides&nbsp; &nbsp;the GST law.<\/li><li>Any expenses that the buyer incurs on behalf of the supplier.<\/li><li>Interest, penalty or late-fees.<\/li><li>Any subsidies given by the government or any direct subsidies.<\/li><li>Any other supplementary expenses which includes handling and packaging costs and commission sustained by the supplier.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">iii) Exclusion of Discounts<\/h3>\n\n\n\n<p>The taxpayer shall while determining the taxable value exclude\nall the discounts from the value of supply whether it is a pre-supply discount\nor a trade supply. Nonetheless, the post supply discount during the valuation time\ncan also be excluded if the mentioned below two conditions are satisfactorily met:-<\/p>\n\n\n\n<ul><li>If the discount is agreed in accordance with the pre-supply agreement condition as made between the buyer and the supplier.<\/li><li>The buyer shall reverse the Input Tax Credit&nbsp;(ITC) which shall apply to such a discount.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Analysis\nof Valuation Rule for Supply<\/h3>\n\n\n\n<p>The GST law has\nprovided various valuation rules which can be considered while determining the\nvalue of supply of goods and services. Given\nbelow is the list of all probable circumstances wherein there is requirement to\nimplement valuation rule and has been categorized under seven heads. These are:-<\/p>\n\n\n\n<p><strong>Valuation Rule 1<\/strong><\/p>\n\n\n\n<p>It provides for the value of supply\nof Goods or Services where the consideration is not wholly in money. Like for\nexample: where a buyer gives another good which is in exchange of barter and partial\nconsideration.<\/p>\n\n\n\n<p><strong>Valuation Rule 2<\/strong><\/p>\n\n\n\n<p>It provides for the value of supply\nof Goods or Services or both but such valuation is between related or distinct\npersons, but not through an agent. Example shall include the\ncases where related persons or entities are supplied with goods or services and\nthey have separate registration but the control is common.<\/p>\n\n\n\n<p><strong>Valuation Rule 3<\/strong><\/p>\n\n\n\n<p>The value of supply of goods received\nor made through an agent. For example there can be particularcases\nbetween Principal and agent where goods or services are supplied between them.\nThere might be no value addition but cases like these will fall under the description\nof supply.<\/p>\n\n\n\n<p><strong>Valuation Rule 4<\/strong><\/p>\n\n\n\n<p>This contains valuation on the cost of acquisition basis and\nthe manufacture cost basis.<\/p>\n\n\n\n<p><strong>Valuation Rule 5<\/strong><\/p>\n\n\n\n<p>This includes any residual or different method for\ndetermining the value for supply of goods and services which can be justified fairly.<\/p>\n\n\n\n<p><strong>Valuation Rule 6<\/strong><\/p>\n\n\n\n<p>This includes determination of the value with respect to certain supplies. It shall cover particular cases such as Life Insurance <em><strong>Business<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Business\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> and Foreign Currency Convertor under it.<\/p>\n\n\n\n<p><strong>Valuation Rule 7<\/strong><\/p>\n\n\n\n<p>This will completely be applicable\nwhere value for supply of service covers the case of pure agent.\nExclusive application of this valuation rule is for Principal-Agent related\ncases. <\/p>\n\n\n\n<p>These valuation rules are case specific, the GST council has\nalso mentioned definite businesses such as the life insurance business and the foreign\ncurrency sale, etc and their particular valuation rules .<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>The Transaction Value concept was adopted under the GST Law\nby taking into consideration the Hon\u2019ble Supreme Court judgements that the tax\nauthorities cannot force the businessman\u2019s to sell their goods at a specified\nprice to maximise his profit.<\/p>\n\n\n\n<p>Therefore, the taxpayers need to know the valuation rule and correctly decide the value of supplies in accordance with section 15 of CGST ACT, 2017 and the rules as prescribed. The taxpayers have to be cautious while paying the due tax for the purpose of saving additional tax liability with interest and penalty for increase in value by the Tax Authorities. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/know-about-gst-business-loan\/\">What are the Things you Should Know about GST Business Loan?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Every taxable person is responsible to pay tax on ad-valorem basis meaning \u201caccording to the value\u201d the person is taxed based on the value of transaction or a property. Every individual liable to pay tax has to pay GST on both for supply of goods or services and the value for the same has to [&hellip;]<\/p>\n","protected":false},"author":33,"featured_media":29502,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1699],"acf":{"service_id":"96"},"authorName":"Kandarp Vanita","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/image_2021_02_01T09_09_44_024Z.png","authorDescription":"Kandarp Vanita has done masters in Corporate and Commercial Law from WB National University of Juridical Sciences. She has 3 yrs of experience in drafting legal documents &amp; dissertations. Being a curious reader, she is also passionately into providing legal backups and comprehensive understandings in every aspect of Law to the firms.","postViews":5824,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29487"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/33"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=29487"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29487\/revisions"}],"predecessor-version":[{"id":29504,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29487\/revisions\/29504"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/29502"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=29487"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=29487"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=29487"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}