v Value
of Supply
Every act for collecting revenue makes
provisions for determination of value as tax which is normally payable on
ad-valorem basis. In GST also, tax is payable on ad-valorem basis i.e.
percentage of value of supply of Goods/Services. Section 15 of the CGST Act and
Determination of Value of Supply, CGST Rules contains provisions relating to
valuation of supply of goods/services.
v Transaction
Value
Under GST law, taxable value is
transaction value i.e. price actually paid or payable, provided supplier &
recipient are nor related and price is sole consideration. In most of the cases
of regular normal trade, invoice value will be the taxable value. However, to
determine value of certain specific transactions, Determination of Value of
Supply rules have been prescribed in CGST Rules, 2017.
v Compulsory
Inclusions
Any taxes, fees, charges levied under
any law other than GST law, expenses incurred by the recipient on behalf of the
supplier, incidental expenses like commission & packing incurred by the supplier,
interest or late fees or penalty for delayed payment and direct subsidies
(except government subsidies) are required to be added to the price (if not
already added) to arrive at the taxable value.
v Exclusions
of Discounts
Discounts like trade discount,
quantity discount etc. are part of the normal trade and commerce. Therefore,
pre-supply discounts i.e. discounts recorded in the invoice have been allowed
to be excluded while determining the taxable value. Discounts provided after
the supply can also be excluded while determining the taxable value, provided
two conditions are met, namely:
·
discount
is established in terms of a pre supply agreement between the supplier &
the recipient and such discount is linked to relevant invoices
·
input
tax credit attributable to the discounts is reversed by the recipient.
v Value
of supply when consideration is not solely in money
Where the supply of goods or services
is for a consideration not wholly 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)
v Value
of supply between distinct and related persons (excluding Agents)
A person who is under influence of
another person is called a related person like members of the same family or
subsidiaries of a group company etc. Under GST law various categories of
related persons have been specified and as relation may influence the price
between two related persons therefore special valuation rule has been framed to
arrive at the taxable value of transactions between related persons. In such
cases following values have to be taken sequentially to determine the taxable
value: -
·
Open
Market Value
·
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)
However if the recipient is eligible
for full input tax credit, the invoice value will be accepted as taxable value.
It has also been provided that where the goods being supplied are intended for further
supply as such be 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 unrelated customer.
v Value
of supply of goods made or received through an agent
·
Open
market value of goods being supplied, or, at the option of the supplier, 90% of
the price charged for the supply of goods of like kind and quality by the
recipient to his unrelated customer.
·
In
case value cannot be determined under (a) then following values have to be
taken sequentially to determine the taxable value:
§
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)
v Value
of supply of services in case of a Pure Agent
Subject to fulfilment of certain
conditions, the expenditure and costs incurred by the supplier as a pure agent
of the recipient of supply of service, has to be excluded from the value of
supply.
v Determination
of value in respect of few specific supplies
Methods to determine Taxable value of
following five specific supplies have also been prescribed under valuation Rules.
These can be used by the supplier if he so desires.
·
Purchase
or sale of foreign currency including money changing
·
Booking
of tickets for air travel by an air travel agent
·
Life
insurance business
·
Value
of supply of Second hand goods
·
Value
of redeemable vouchers/Stamps/Coupons/tokens
v Special
provision related to determination of Value of service of purchase or sale of
foreign currency including money changing
Option-1
Case
1: Transaction where one of the currencies exchanged is Indian Rupees
Taxable value is difference between
buying rate or selling rate of currency and RBI reference rate for that
currency at the time of exchange multiplied by total units of foreign currency.
However if RBI reference rate for a currency is not available then taxable value
is 1% of the gross amount of Indian Rupees provided/received by the person
changing the money.
Case
2: Transaction where neither of the currencies exchanged is Indian Rupees
Taxable value will be 1% of the lesser
of the two amounts the person changing the money would have received by
converting (at RBI reference rate) any of the two currencies in Indian Rupees.
Option-2
The person supplying the service may
also exercise the following option to ascertain the taxable value, however,
once opted then he cannot withdraw it during the remaining part of the
financial year:
·
One
percent of the gross amount of currency exchanged for an amount upto one lakh
rupees, subject to minimum amount of two hundred and fifty rupees
·
One
thousand rupees and half of a percent of the gross amount of currency exchanged
for an amount exceeding one lakh rupees and up to ten lakh rupees
·
Five
thousand rupees and one tenth of a percent of the gross amount of currency
exchanged for an amount exceeding ten lakhs rupees subject to a maximum amount
of sixty thousand rupees
v Special
provision related to determination of value of service of booking of tickets
for air travel by an air travel agent
Taxable value is 5% of basic fare in
case of domestic travel and 10% of basic fare in case of international travel.
Basic fare means that part of the air fare on which commission is normally paid
to the air travel agent by the airline.
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.
v Special
provision related to determination of value of service in relation to life
insurance business
Taxable value varies with nature of
insurance policy. The details are as follows:
·
Where
policy has dual benefits of risk coverage and investment – Taxable value is
gross premium charged less amount allocated for investments or savings if such
allocation is intimated to the policy holder at the time of collection of
premium.
·
Single
premium annuity policy where allocation for investments and savings is not
intimated to the policy holder – taxable value is ten percent of the single
premium charged from the policy holder.
·
Other
cases- Twenty five percent of premium charged from the policy holder in the
first year and twelve and a half percent of premium charged for subsequent
years.
However, where insurance policy has
benefit of risk coverage only, then taxable value is entire premium charged
from the policy holder.
v Special
provision related to determination of value of second hand goods
The taxable value of supply of second
hand goods i.e. used goods as such or after such minor processing which does
not change the nature of goods shall be the difference between the purchase price
and the selling price, provided no input tax credit has been availed on
purchase of such goods. However, if the selling price is less than purchase
price, that negative value will be ignored.
Persons who purchase second hand goods
after payment of tax to supplier of such goods will be governed by this
valuation rule only when they do not avail input tax credit on such input
supply. If input tax credit is availed, then such supply will be governed by normal
GST valuation.
v Value
of supply of goods repossessed from a defaulting borrower
If the defaulting borrower is not a
registered person, the purchase value will be purchase price in the hands of
such borrower reduced by five percentage points for every quarter or part
thereof, between the date of purchase and the date of disposal by the person making
such repossession.
However, if the defaulting borrower is
registered, there possessing lender agency will discharge GST at the supply value
without any reduction from actual/notional purchase value.
v Special
provisions related to determination of value of redeemable
vouchers/stamps/coupons/tokens
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.
Comments