Affiliated to

University of Mumbai

Revised Syllabus for

Programme:
Bachelor of Commerce
(Accounting & Finance)
Semester V
Under Choice Based Credit System
Academic Year 2022-2023

PROJECT
ON
INDIRECT TAX (GST)
 PROJECT REPORT
ON
VALUE OF SUPPLY
SUBMITTED BY
ROLL NO: 70
DIVISION: B
NAME: KRUSHALI INDUKUMAR THUMMAR
BACHELOR OF COMMERCE (ACCOUNTING & FINANCE)
(SEMESTER V)
UNDER THE GUIDANCE OF
CA AMRITESH MISHRA
ACADEMIC YEAR
2022 - 2023

VALUE OF SUPPLY
INTRODUCTION:

Every fiscal statue makes provision for the 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 and services. Thus it becomes important to know how to arrive at
the value on which tax is to be paid on which tax is to be paid. Provisions relating to value of
supply set out the mechanism to compute such value basis which CGST and
SGST/UTGST(intra-state supply) and IGST( inter-state supply ) should be paid. Section 15
of the CGST act supplemented with the rules under determination of value of supply of
CGST rules prescribes the provision for determining the value of supply of goods and
services made in different circumstances and to different persons.

Section 15 of the CGST act provides common provisions for determining the value of supply
of goods and services. Sub section (1) of section 15 provides the mechanism for determining
the value of a supply which is made between unrelated persons and when price and only the
price is the sole consideration for the supply. In most of the cases of regular normal trade the
invoice value i.e. transaction value ) is the taxable value which is specified under section
15(1). However when value cannot be determined under section 15(1) and for certain specific
transaction the value is determined using determination of value of supply of CGST rules.

Why is value of supply important?

The GST to be applied on a transaction will depend on the value of these goods and services
sold or transferred. 

Buyers can pay for transactions with a monetary consideration by giving the seller cash or
electronically transferring money. They can also pay for transactions with non-monetary
considerations by giving the seller other goods or services in exchange. 
Finally there are cases where they can pay for transactions partly in cash and partly in kind
(by bartering goods or services). Hence it is really important to accurately calculate the value
of supply.

How is the value of supply determined?

As a general rule, the value of supply is the amount that was paid for the goods or services,
minus GST. Because some transactions are paid in cash while others are in trade or barter,
there are two sets of rules for calculating the value of supply.

 The General Valuation Rules apply to transactions where the buyer pays the whole
price of the products or services in cash.
 In this case, the value of supply is the total price or consideration paid,
minus the GST on that amount.
 Value of Supply = Consideration - GST on Consideration
 The Special Valuation Rules apply to transactions where some or all of the payment
is in trade instead of cash.
 Completely non-cash payment 
 If the buyer pays entirely in trade and no cash, the value of
supply is the open market value of the products or services,
minus the GST on that amount.
 Value of Supply = OMV - GST on OMV
 Partially non-cash payment
 If the buyer pays partially in cash and partially in trade, the
value of supply is the cash price paid plus the open market
value of the traded products or services, minus the GST on that
total amount.
 Value of Supply = (Monetary Consideration + In-kind
Consideration) - GST on Total Consideration      Note: The
value of supply includes cess, billable expenses, subsidies,
penalties, and all taxes except GST (and any other charges that
may or may not be included in the price of the goods and
services supplied). 

Value of Supply for imported goods and services under GST

The value of imported goods is calculated based on the rules provided in the Custom Act.
The value of supply is the custom value of the imported goods plus the import duty paid.
(Custom Value + Import Duty = Value of Supply)   The value of taxable supply on an
imported service is the total consideration times the taxable percentage. (Value of Taxable
Supply = Total Consideration X Taxable Percentage)

Discounted Supplies under GST

When items are sold at a discount, their value for GST changes accordingly. The value of
supply is the item’s original value minus the discount amount. (Value of Supply = Original
Value - Discount)
The GST is levied upon this value of supply, not the original value.

Supply of free items under GST

It’s time you thought beyond freebie marketing strategies because under GST provisions, you
may not be allowed to receive input tax credit (refund of tax paid on purchase of goods) on
goods that were either lost, destroyed, written off or disposed by you as gifts and
free samples.

One way to get input tax credit on items that you give away for free is by declaring their
value as a part of taxable supply on your invoices and collect GST on the same (unless you
declare its value/OVM as a part of the taxable supply and collect GST on the same).
Rules and provisions related to value of supplies under the GST regime can be found
under section 15 of the CGST Act 2017
DEFINATION:

Agent means a person including a factor, broken, commission agent, arhatia, del credere
agent, an auctioneer or any other mercantile agent, by whatever name called who carries on
the business of supply or receipt of goods or services or both behalf of another [section2(5)].

Factor

Broker

commission agent
AGENT
arhatia

del credre agent

auctioneer

mercantile agent

Consideration in relation to the supply of goods and services or both includes-

(a) Any payment made or to be made whether in money or otherwise in respect of in

response to or for the inducement of the supply of goods or services or both whether
by the recipient or by any other person but shall not include any subsidy given by the
central government or a state government.
(b) The monetary value of any act or forbearance in respect of response to or for the
inducement of the supply of goods or services or both whether by the recipient or by
any other person but shall not include any subsidy given by the central government or
a state government.
 Consideration

payment in money or monetary value of

otherwise for the any act or forbearance
supply for the supply

deposit to be excluding
considered as subsidy given by
payment central/state
goevrnments

when the supplier

applies such deopist as
consideration for the
said supply

Family means-

(a) The spouse and children of the person and

(b) The parents grand parents brothers and sister of the person if they are wholly or
mainly dependent on the said person[section2(49)]

Goods means every kind of movable property other than money and securities but includes
actionable claim, grass and things attached to or forming part of the land which are agreed to
be severed before supply or under a contract of supply[section 2(52)]

Market value shall mean the full amount which a recipient of a supply is required to pay
in order to the goods or services or both of like kind and quality at or about the same time
amd at the same commercial level where the recipient and the supplier are not related [section
2(73)]
 where recipient and
MARKET VALUE at the same
supplier are not
commerical level
related

full amount which a

at or abput the same
recipeint is required
time
to pay

to obtain goods of like kind and

and/or services quality

Person includes

(a) An individual
(b) A Hindu undivided family
(c) A company
(d) A firm
(e) A limited liability partnership
(f) An association of persons or a body of individuals whether incorporated or not in
India or outside India
(g) A local authority
(h) Central government or a state government
(i) Trust

Money means the Indian legal tender or any foreign currency, cheque, promissory note, bill
of exchange , letter of credit, draft, pay order, traveller cheque, money order, postal or
electronic remittance or any other instrument recognised by the reserve bank of India when
used as a consideration to settle an obligation or exchange with Indian legal tender of another
denomination but shall not include any currency that is held for its numismatic value
[section2(75)]
 indian legal tender
foreign currency
cheque
promissiory note
bill of exchange

M O N EY
letter of credit
draft
pay order
traveller cheque
money order
postal or electronic
any other instrument
recongised by RBI
VALUE OF SUPPLY [SECTION 15]

Section Value of supply

15
Sub – Clause Particulars
section
(1) The value of a supply of goods and 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 foe the supply.
(2) The value of supply shall include-
(a) Any taxes duties cesses fees and charges levied under any law
for the time being in force other than this act the state goods
and services tax act , the union territory goods and services tax
act and the goods and services tax
(b) 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 and not included in the price actually paid or payable
for the goods or services or both
(c) Incidental expense including commission and packing charged
by the supplier to the recipient of a supply and any amount
charged for anything done by the supplier in respect of the
supply of goods or services or both at the time of or before
delivery of goods or supply of services
(d) Interest or late fees or penalty for delayed payment of any
consideration for any supply and
(e) Subsidies directly linked to the price excluding subsidies
provided by the central government and state government
Explanation – for the purpose of this subsection the amount of subsidy shall
be included in the value of supply of the supplier who receives the subsidy
(3) The value of the supply shall not include any discount which is given
(a) Before or at the time of the supply if such discount has been
duly recorded in the invoice issued in respect of such supply
 and
(b) After the supply has been effected if-
(i). such discount is established in terms of an agreement
entered into at or before the time of such supply and
specifically linked to relevant invoices and
(ii). Input tax credited as in attributed to the discount on the
basis of discounted issued by the supplier has been reversed by
the recipient of the supply
(4) Where the value of the supply of goods or services or both cannot be
determined under subsection (1) the same shall be determined in such manner
as may be prescribed
(5) Notwithstanding anything contained in subsection (1) or sub section (4) thev
value of such supplies as may be notified by the government on the
recommendation of the council shall be determined in such manner as may be
prescribed
Explanation – For the purposes of this act -
(a) Persons shall be deemed to be “related persons” if
(i) Such person are officers or directors of one another 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 hold twenty
five percent 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 control a third person or
(vii) Together they directly or indirectly control a third person or
(viii) They are members of the same family
(b) The term “person” also includes legal person
(c) 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
CONCULSION

Understanding how to calculate the value on which tax is due becomes crucial. The method
to determine the value on which CGST, SGST, UTGST (for intra-state supplies), and IGST
(for inter-state supplies) to be paid is outlined in the provisions relating to value of supply.

Determination of value of supply is a crucial stage because GST applicable to a transaction

will depend upon the value of these goods and services sold or transferred. Purchasers can
pay for transactions in exchange for cash by giving the vendor cash or transferring money
electronically. They can also pay for non-cash transactions by offering the vendor other
goods or services in exchange. Common provisions for calculating the value of the supply of
goods and services are provided in Section 15 of the CGST Act.

The value of supply is often equal to the price paid for the products or services, less GST.
The initial cost of the item less the discount is the supply's value. This discount is calculated
in accordance with a contract that was signed at or before the time of the supply and is clearly
associated with the relevant invoices. Value of Supply is calculated as (Monetary
Consideration - In-Kind Consideration) - GST on Total Consideration.

The Custom Act's rules are used to determine the value of imported products. The custom
value of the imported items plus the amount of the import duty paid make up the supply's
value. The value of an item for GST purposes varies when it is discounted.

The monetary value of any act or omission in response to or causing the delivery of goods or
services does not include subsidies by any central or state government, whether by the
recipient or any other person.

Some important definitions of agent, consideration, family, property, market value, person
and money are also covered in this study.

Hence, this makes it very important to accurately calculate the value of the supply.