VALUATION OF TAXABLE SUPPLY

(Section 15 )
The value of a supply of goods or services or both
shall be the transaction value

Transaction value i.e. ‘the price actually paid or payable for

the said supply of goods or services or both

where the supplier and price is the

and recipient are sole consideration’
not related
 Related Person under GST

Officers / Directors of one another’s business

Partners in business

Employer – employee

A person directly / indirectly owns / controls / holds 25% of shares

of both the persons
One directly / indirectly controls the other

Both are directly / indirectly controlled by a third person

Together, they directly / indirectly control a third person

Members of the same family

Sole agent / distributor / concessionaire of the other

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 Value of
Supply

Inclusions Exclusions

• Taxes, cesses, duties, fees, charges • Post supply Discount

under any statute, other than taxes
paid under GST regime; • Discount known at the
•Amount incurred by Recipient time of agreement & at or
which is liable to be paid by the
Supplier before supply
• Penalty •Input tax credit has been
• Incidental charges like
commission, packing reversed by the recipient
• Interest, Late fees of the supply
• Any subsidy except subsidy given
by the government
Where value cannot be determined u/s 15(1)
1. Price is not the sole consideration

2. Supplier-recipient are related persons:

Recourse to Rules even if the Supplier-Recipient relationship:

Did not influence the price;
Precedes agreement to the supply;
Has no bearing on pricing;
Has no bearing on Agreement to the Supply;
Has no relevance to the Supply;
Was to meet with different criteria or purpose;

(Rules will apply both ways – supplier to recipient and recipient to

supplier)
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 Valuation Rules under CGST Rules,
2017 (Rule 27 to 35)
Rule No Description

27 Value of supply of goods or services where consideration is not wholly in

money
28 Value of supply of goods or services or both between distinct or related
persons, other than through an agent
29 Value of supply of goods made or received through an agent

30 Value Of Supply Of Goods Or Services Or Both Based On Cost

31 Residual method for determination of value of supply of goods or services or

both .
31A. Value of supply in case of lottery, betting, gambling and horse racing.

32 Determination of value in respect of certain supplies .

(This rule provides the valuation method for five specific supplies)
33 Value of supply of services in case of pure agent .

34 Rate of exchange of currency, other than Indian rupees, for determination of

value.-
35 Value of supply inclusive of integrated tax, central tax, State tax, Union
territory tax 6
 RULE 27 - Value of supply of goods or services where
consideration is not wholly in money

The value of supply shall be-

a. The open market value of such supply

b. If open market value not available under (a), be the sum total of consideration
in money and such further amount in money as is equivalent to consideration
not in money if such amount is not known at time of supply

c. If value is not determinable under (a) or (b), the value of supply of goods/
services of like kind and quality

d. If value not determinable under (a), (b) or (c), be the sum total of
consideration in money and such further amount in money that is equivalent
to consideration not in money as determined by application of rule 30 or 31
in that order.

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What is open market value?

Open market value means the full value of money excluding taxes
under GST laws, payable to obtain such supply at the time when
supply being value is made , provided such supply is between
unrelated person and price is the sole consideration for such supply.

What is supply of like kind and quality?

Supply of like kind & quality means any other supply made under
similar circumstances ,which is same or closely or substantially
resembles in respect of characteristics ,quality, quantity, functionally,
reputation to the supply being valued.
 RULE 27 OF CGST RULES - ILLUSTRATION

(1) Where a new phone is supplied for Rs.20,000/-(Twenty thousand rupees)

along with the exchange of an old phone and if the price of the new
phone without exchange is Rs.24,000/-(Twenty Four Thousand rupees),
The open market value of the new phone is Rs.24,000/- twenty four
thousand rupees.

(2) Where a laptop is supplied for Rs.40,000/- (Forty thousand rupees) along
with the barter of a printer that is manufactured by the recipient and the
value of the printer known at the time of supply is Rs.4000/- (Four thousand
rupees) but the open market value of the laptop is not known,
The value of the supply of the laptop is Rs.44000/- (Forty four thousand
rupees).

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RULE 28: Value of supply of goods or services or both between
distinct or related persons, other than through an agent
(a) The open market value of such supply

(b) if the open market value is not Value of supply of goods or

available services of like kind and quality

(c) if the value is not determinable under clause (a) or (b), be the value as
determined by the application of rule 30 or rule 31, in that order:

Provided that where goods are intended for further supply as such by 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 customer not being a related person

Where the recipient is eligible for full input tax credit, the value declared in the
invoice shall be deemed to be the open market value of goods or services
 RULE 29: VALUE OF SUPPLY OF GOODS MADE OR RECEIVED
THROUGH AN AGENT

a) be the open market value,

or
at the option of the supplier, be 90% of the price charged for the supply
of goods of like kind and quality by the recipient (agent) to his customer
not being a related person,
where the goods are intended for further supply by the said recipient
(agent)

b) where the value of a supply is not determinable under clause (a),

the same shall be determined by application of rule 30 or rule 31 in that
order.
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 RULE 29: VALUE OF SUPPLY OF GOODS MADE OR RECEIVED
THROUGH AN AGENT
Illustration:
A principal supplies groundnut to his agent and the agent is supplying
groundnuts of like kind and quality in subsequent supplies at a price of
Rs.5000/- (five thousand rupees) per quintal on the day of the supply.

Another independent supplier is supplying groundnuts of like kind and

quality to the said agent at the price of Rs.4550/- (four thousand five
hundred and fifty rupees) per quintal.
Question :
What will be the value of supply ?
The value of the supply made by the principal shall be Rs.4550/-(four
thousand five hundred and fifty rupees) per quintal or where he exercises
the option, the value shall be 90 per cent. of Rs.5000/- (five thousand
rupees) i.e., Rs.4500/-four thousand five hundred rupees per quintal.
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 RULE 30: VALUE OF SUPPLY OF GOODS OR SERVICES OR BOTH
BASED ON COST

• Where value of supply of goods or services or both is not determinable by

any of the preceding rules,
• the value shall be 110% of the:
 cost of production or manufacture or
 cost of acquisition of such goods or
 cost of provision of such services.

RULE 31: Residual Method for determination of value of

supply of goods or services or both
where the value of supply of goods or services or both cannot be determine
under rules 27 to 30:-
The same shall be determined using REASONABLE MEANS consistent with the
principles and the general provisions of section 15 and the provisions of this
Chapter:

Provided that in the case of supply of services, the supplier may opt for this rule,
ignoring rule 30. 13
 Rule 31A :- Value of supply in case of lottery, betting,
gambling and horse racing
Particulars Lottery run by State Governments. Lottery authorised by State
Governments.
Value 100/112 of the face value of ticket or 100/128 of the face value of ticket or of
of the price as notified in the the price as notified in the Official
Official Gazette by the organising Gazette by the organising State,
State, whichever is higher whichever is higher.

Meaning "lottery run by State Governments" "lottery authorised by State

means a lottery not allowed to be Governments" means a lottery which is
sold in any State other than the authorised to be sold in State(s) other
organizing State than the organising State also
Note : The value of supply of actionable claim in the form of chance to win in betting,
gambling or horse racing in a race club shall be 100% of the face value of the bet or the
amount paid into the totalisator.
 Special valuation methods for 5 supplies

Purchase or sale of foreign currency

including money changing life insurance
business

Value of
Booking of tickets for supply of
air travel by an air second hand
travel agent value of
goods redeemable
vouchers/stamps/
coupons/tokens
Rule 32(2) (a) DEALING IN FOREX INCLUDING MONEY CHANGING
Option-1

When exchanged from or/ to INR:

(Difference of Buying rate / Selling rate and RBI reference rate) X Total units of
currency

(If RBI reference rate is not available, value shall be 1% of gross amount of INR
received or provided)

• If neither of two currencies exchanged in INR,

• the value shall be equal to 1% of the lesser of the two amounts

• the person changing the money would have received by converting any of the
two currencies into INR on that day at the reference rate provided by RBI.

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Example relating to where one of the currencies exchanged is
Indian rupees

FACT- On 10th may Mr. ZUBAIR converted USD $ 100 into Rs. 6400
@ 64 per USD through Eastern money changers .
RBI reference rate on 10th may for USD $ is Rs 65 per USD. The
value of supply in this case is (Rs 65- Rs 64)* $100= Rs 100 and
GST will be levied on this amount.

If the RBI reference rate is not available ,then 1 % of Rs 6400 i.e., Rs

64 will be the value of supply of service.
 Example relating to where neither of the
currencies exchanged is Indian rupees.
US $ 9000 are converted into UK 45OO.
RBI reference rate at that time for US $ is Rs 63 per US dollar and
UK is Rs 82 per UK pound .
In this case, neither of the currencies exchanged is Indian Rupee.

Hence ,in the given case, value of taxable service would be 1% of

the lower of the following:-

(a) US dollar converted into Indian rupees = $9000 multiply by Rs

63=Rs.5,67,000/-
(b) UK pound converted into Indian rupees = 4500 multiply by Rs
82=Rs.3,69,000/-

value of taxable service = 1%of Rs 369000= Rs 3690

 RULE 32: The Value In Terms Of Clause (B) For A Financial Year
And Such Option Shall Not Be Withdrawn During The Remaining
Part Of That Financial Year.

1% of the gross amount of currency

Amount of currency
exchanged or Rs. 250/-, whichever is
exchanged up to Rs.1 lakh
higher

Amount of currency Rs. 1,000/-plus 0.5% of the gross amount

exchanged exceeding Rs.1 of currency exchanged above Rs. 100,000/-
lakh and up to Rs.10 lakhs
Amount of currency Rs. 5,500/- plus 0.10% of the gross amount
exchanged exceeding Rs.10 of currency exchanged above Rs.10 lakhs or
lakhs Rs. 60,000/-, whichever is lower
 Rule 32(3) - Air Travel Agents:

• Domestic bookings: 5% of Basic Fare

• International bookings: 10% of Basic Fare

“Basic fare” means that part of the air fare on which

commission is normally paid to the air travel agent by the airline.

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 Rule 32(4) Life Insurance Business

a) If such amount is intimated to the policy holder at the time of supply of service;

Gross Premium charged from a policy holder reduced by the amount

allocated for investment, or savings on behalf of the policy holder,

b) In case of single premium annuity policies other than (a) - 10% of single premium
charged from the policy holder; or

c) in all other cases, 25% of the premium charged from the policy holder in the first
year and 12.5% of the premium charged from policy holder in subsequent years;

This shall not apply where the entire premium paid by the policy holder is only
towards the risk cover in life insurance.

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 Rule 32(5) Second Hand Goods

Applicability : For a person dealing in buying and selling of second hand goods.

Valuation will be :
• Supply of used goods as such or after such minor processing which does not change the
nature of the goods and
• where no ITC has been availed on purchase of such goods,

• the value of supply shall be the difference between the selling price and purchase price
and where the value of such supply is negative it shall be ignored.

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 Rule 32(5) Second Hand Goods
Applicability: Goods Repossessed from a Defaulting Borrower who is Unregistered
borrower.
Purchase Valuation for the purpose of recovery of a loan or debt,
Shall be deemed to be the purchase price of such goods by the defaulting 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.
 Example
Fact:
A has purchased goods worth Rs.1,00,000 on 01.07.2017 and took a loan from “B” .
“A” defaulted in making the payment of loan to “B” therefore “B” took the repossession of
the goods on 15.01.2018.
“ B” disposed the goods on 31.03.2018.
Query: What is the valuation of the goods disposed?
Answer : Rs.85,000/- as on 31.03.2018.
Working: Rs.1,00,000/- (purchase price) reduced by 5% every quarter in this case for 3
quarter .i.e. 15%.( date of purchase 01.07.2018 & date of disposal 31.03.2018
 Tax on sale of Used Motor Vehicles

For sales from 25.01.2018

Capacity More than 1500 CC Other than this

more and of length
of 4000 mm
Tax Rate 18% 12%
Valuation For registered person who has claimed the
depreciation shall be: Sales Value less WDV value.

In any other case value shall be: Sales Value Less

Purchase price.
In case of negative value NO GST.
 Notification No. 8/2018 -Central Tax (Rate)

Explanation 'For the purposes of this notification, -

(i) in case of a registered person who has claimed depreciation under section 32 of the
Income-TaxAct,1961(43 of 1961) on the said goods, the value that represents the margin
of the supplier shall be the difference between the consideration received for supply of
such goods and the depreciated value of such goods on the date of supply, and where the
margin of such supply is negative, it shall be ignored; and
(ii) in any other case, the value that represents the margin of supplier shall be, the
difference between the selling price and the purchase price and where such margin is
negative, it shall be ignored.
 Notification No. 8/2018 -Central Tax (Rate)
2. This notification shall not apply, if the supplier of such goods has availed input tax
credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act,
2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value
Added Tax or any other taxes paid, on such goods.
 Rule 32(6) Token / Coupon / Voucher / Stamp

• The value of a token, or a voucher, or a coupon, or a stamp (other than

postage stamp)
• which is redeemable against a supply shall be money value of the goods or
services redeemable against such token, voucher, coupon, or stamp.

Rule 32(7) Distinct Persons

• The value of taxable services provided by such class of service providers; as
may be notified by the Government between distinct persons, (Entry-2 of
Schedule I) where ITC is available (other than blocked under S.17(5)) shall be
deemed to be NIL.

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 RULE 33: DEFINITION OF 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 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 supply he provides on his
own account.

For example, income-tax liability of a client is paid by the CA`

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 RULE 33: VALUE OF SUPPLY OF SERVICES IN CASE OF
PURE AGENT

The expenditure or costs incurred by the pure agent shall be excluded from
the value of supply, if ALL the following conditions are satisfied, namely:
a) the supplier acts as a pure agent of the recipient of the supply, when he makes
the payment to the third party on authorisation by such recipient;

b) 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;

c) and the supplies procured by the pure agent from the third party as a pure
agent of the recipient of supply are in addition to the services he supplies on
his own account.

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 RULE 34: RATE OF EXCHANGE OF CURRENCY, OTHER THAN
INR, FOR DETERMINATION OF VALUE

For Goods : As notified by the Board under section 14 of the Customs Act, 1962
for the date of time of supply of such goods in terms of section 12 of the Act.

For Services: As per the generally accepted accounting principles for the date of
time of supply of such services in terms of section 13 of the Act.

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 RULE 35: VALUE OF SUPPLY INCLUSIVE OF
INTEGRATED TAX, CENTRAL TAX, STATE TAX, UNION
TERRITORY TAX

Then:

Tax amount - (Value inclusive of taxes X tax rate in % of IGST or, as

the case may be , CGST, SGST or UTGST) divided by (100+ sum of tax
rates, as applicable, in %)
 Mr. Mohit Golchha Mr. Alakto Majumder Mr. PP Singh
B.Com (H), FCA B.Com (Hons), FCA, ACMA, DISA B.Sc., FCA, FCS
Professional Exp: 9 years Professional Exp: 25Years Professional Exp: 15 Years
Mob: 98999-25654 Mob : 98184-27701 Mob: 98712-29590

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