Value of Supply - Inclusion and Exclusions - Sec 15 and Rule 27 to 31

Value of Supply - Inclusion and Exclusions - Sec 15 and Rule 27 to 31

Valuation of supply is a significant aspect of the GST law because it is the amount on which GST is payable. Value of supply can be defined as the value of a contract of goods or services, which is the amount being payable for the said supply where purchaser and supplier are not related and price is the sole consideration for the said supply. In this article, we are going to gain a deeper understanding of valuation rules. 

VALUE OF SUPPLY WHERE PARTIES ARE NOT RELATED AND PRICE IS THE SOLE CONSIDERATION

If supplier and recipient are not related then the actual price paid for the transaction is considered as actual value of supply. The value shall be accepted even where the recipient and supplier are related provided that the relationship between them has not influenced the price in any way. Also in the case of principal and agent, where goods are being transferred from one place to another of the same business or to and from from principal to agent, the value of such a supply shall be the transaction value. 

Inclusions in the value of supply:

• Any taxes, fees, or charges imposed under any different law besides the GST law.
• Interest, late fees, or penalty
• Any expense incurred by the buyer on behalf of the supplier
• Any government or direct subsidy 
• Any other incidental or supplementary expenses which included packaging and handling costs or commission sustained by the supplier. 

Exclusions related to discounts

RULE 27: VALUE OF SUPPLY WHEN MONEY IS NOT THE ONLY CONSIDERATION

There are instances where the consideration is paid in the form of other than money as well. In these cases, the value of supply is determined as follows:

1. The open market value of the goods or services involved in the supply. 
2. If the open market value is not known, then the value will be total money consideration plus the money value of consideration not in money. 
3. Value of like kind and like quality 
4. If the value is not ascertained from the above, total money consideration plus the amount in money is equivalent to the consideration not in money as per Rule 30 or Rule 31.

RULE 28: VALUE OF SUPPLY BETWEEN RELATED OR DISTINCT PERSON OTHER THAN AGENT 

In this instance, the value of supply will be computed as followers:

1. Open market value of the supply involved
2. Value of supply of like kind and like quality 
3. The value computed as per Rule 30 or Rule 31 
4. If the value is not ascertainable through the above provisions, then the supplier has the option to compute the value of the supply of such goods as 90% of the price charged by the recipient to its unrelated customers. 
5. Given that if the recipient is eligible to take ITC on such supplies, the invoice value shall be considered as the open market value which in turn will be the taxable value of supply. 

RULE 29: VALUE OF SUPPLY OF GOODS THROUGH AN AGENT 

This rule covers the scenario where the parties have a relation of principal and agent. In such a case, the value of supply shall be determined as under:

1. The open market value of goods supplied or 90% of such value supplied by the agent to his unrelated customers. Supplied by an agent to his customer are of the same kind and same quality as supplied by the principal to the agent and the agent had the intention to sell such goods in the market. 
2.  Value of supply as determined by Rule 30 or Rule 31  if the value can not be determined with (a) above

RULE 30: VALUE OF SUPPLE BASED ON COST 

In cases where the value of supply can not be determined by applying any of the above rules, in these scenarios, the value of supply can be taken as 100% of the cost of production of such goods or provision of such services or acquisition of such goods. 

RULE 31: RESIDUAL METHOD FOR VALUE OF SUPPLY 

In instances where the value of supply is not ascertainable by applying the above rules, in such cases the value of supply needs to be determined by using reasonable means consistent with the general provisions of Sec 15 considered along with the valuation rules. For services, this rule can be considered as ignoring Rule 30. 

These were the basic valuation rules given in the GST laws. Further in the next article, we will be discussing the value of supply in different cases. 

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