Value of Supply under GST – Section 15 of CGST Act
The Value of Supply under GST – Goods and Services Tax is the price paid for the goods or services supplied where there is no relation between the supplier and the recipient of the goods and the price needs to be considered for the supply.
It includes any taxes, duties, fees levied under any law. It also includes any amount that the supplier has to pay but which has been incurred by the recipient of the supply and excluded from the price payable for the goods or services. Besides these values, the value of supply includes any amount charged for anything done by the supplier of goods or services or both during delivery of goods or supply of services and amount of interest or penalty if the payment is not made on time. Subsidies directly linked to the price are also included in the value of supply. It excludes subsidies provided by the Central Government and State Governments.
The value of the supply shall not include any discount which is given before or at the time of the supply as such a discount has already been recorded in the invoice issued. However, the value of the supply includes any discount which is given after the supply if such a discount is established in terms of an agreement signed at the time of supply or before the time of supply. The value of the supply of goods or services shall be determined in such manner as may be prescribed if the value of the supply of goods or services or both cannot be determined under sub-section (1).
For this Act, persons are said to be “related persons” if such persons are officers or directors of one another’s businesses, legally recognized partners in business, employer and employee, one of them directly or indirectly controls the other, either both of them are directly or indirectly controlled by a third person or both of them control a third person
The word “person” also indicates legal persons. A person is a sole agent or sole distributor of the other person and is also not related.
RULES FOR DETERMINATION OF VALUE OF SUPPLY
1. Where the supply of goods or services is for a consideration not wholly in
money, the value of the supply shall-
a) such amount is known at the time of supply
b) be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money provided such amount is known at the time of supply if the open market value is not available under clause (i),
c) if the value of supply is not determinable under clause (i) or clause
(ii), be the value of supply of goods or services or both of like kind and quality;
d) if the value is not determinable under clauses (i), (ii) and (iii), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money according to the application of rule 30 or rule 31 in that order.
2. The value of supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of a section shall-
a) be the open market value of such supply;
b) be the value of supply of goods or services of like kind and quality if the open market value is not available,
c )be the value as determined by the application of rule 30 or rule 31, in that order if the value is not determinable under clause (i) or (ii),
3. The value of supply of goods between the principal and his agent shall-
a) be the open market value of the goods being supplied
c) 90 % of the price charged for the supply of goods of like kind and quality by the recipient to his customer. Here, the goods are intended for further supply by the recipient.
c) be determined by the application of rule 30 or rule 31 if the value of a supply is not determinable under clauses (i) and (ii)
4. The value shall be one hundred and ten percent of the cost of production,
manufacture, the cost of provision of such services, the cost of acquisition of such goods if the value of a supply of goods or services or both cannot be determined by any of the preceding rules 1. and 2.
5. Value of supply of goods or services or both shall be determined using reasonable means consistent with the principles and the general provisions of section 15 if the same cannot be determined under rules 27 to 30,
6. The value of the supply of services like purchase or sale of foreign currency shall be determined by the supplier of services in various ways.
a) When the currency is exchanged from, or to, Indian Rupees, it’s value
shall be equal to the difference in the buying rate or the selling rate and the Reserve Bank of India reference rate for that currency is multiplied by the total units of currency at that time.
b) The supplied value of goods and services shall be one per cent. of the gross
amount of Indian Rupees provided or received by the person changing the money if the Reserve Bank of India reference rate for a currency is not available. The same value shall be equal to one per cent. of the lesser of the two amounts the person in a case where neither of the currencies exchanged is Indian Rupees
c) at the option of the supplier of services, the value shall be equal to one per cent. of the gross amount of currency exchanged for an amount vary from 250 rupees up to one lakh rupees, for an amount exceeding one lakh rupees and up to ten lakh rupees, the value is equal to the one thousand rupees and half of a per cent. of the gross amount of currency exchanged and for an amount exceeding ten lakh rupees, subject to a maximum amount of sixty thousand rupees, it is equal to five thousand and five hundred rupees and one-tenth of a per cent of the gross amount of currency exchanged
6. The value of tickets for travel by air provided by an air travel agent shall be equal to an amount calculated at the rate of five per cent. of the basic fare in the case of domestic bookings, and at the rate of ten per cent of the basic fare in the case of international bookings.
7. If the amount allocated for investment, or savings an amount is intimated to the policyholder at the time of supply of service, the value of supply of services regarding life insurance business shall be equal to the gross premium charged from a policyholder reduced by the amount allocated for investment. The value of supply of services is equal to ten percent of the single premium charged from the policy holder in case of single premium annuity policies other than mentioned above and twenty-five per cent. of the premium charged from the policyholder in the first year and twelve and a half per cent. of the premium charged from the policyholder in subsequent years in all other cases.
8. The value of supply shall be equal to the difference between the selling price and the purchase price if a taxable supply is provided by a person dealing in buying and selling of second-hand goods and where no input tax credit has been availed on the purchase of such goods and it shall be ignored if the value of such supply is negative.
9. The value of a token, or a voucher, or a coupon, or a stamp (other than
a postage stamp) shall be equal to the money value of the goods or services or both redeemable against them if they are redeemable against a supply of goods or services or both.
10. 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, shall equal to NIL.
Value of Supply of Services in Case of Pure Agent
Not withstanding 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, namely,-
(i) the supplier acts as a pure agent of the recipient of the supply, when
he makes the payment to the third party on authorization 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 the supply is 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 a 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 the 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.
The tax amount (taxes including integrated tax, central tax, State tax, Union Territory tax) shall be determined as follows:
Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the
a case may be, CGST, SGST or UTGST) ÷ (100+ sum of tax rates, as applicable, in %)
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