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Valuation Rules Under GST

Prakash Matre
Prakash Matre at April 14, 2023

Know Valuation Rules

Every fiscal statue makes rules and regulations regarding the determination of tax value, similarly, under GST, Section 15 of the CGST Act talks about the valuation of supply of goods or/and services supplied in different circumstances and to a different person. In this article, we will discuss the different valuation of GST rules.

What do you understand by valuation Rule Under GST?

As per the rules of valuation under GST, the tax value can be determined based on the ad-valorem basis. In other words, the taxpayer can determine the value of tax based on the assessed value of goods or/and services supplied. However, these three things shall be taken into consideration at the time of valuation of tax under GST:

i) Transaction Value As per GST, the taxable value is considered as transaction value. In other words, the value that has been paid or has to be paid by the buyer to the supplier will be considered as transaction value under GST. It shall be noted the supplier and buyer shall not be related persons and price is the only consideration. However, for some special cases, here explain the special valuation rules in GST, the transaction value has been determined in special valuation rules of GST, 2017.

ii) Compulsory Inclusions Here are some major things that shall form a part at the time of valuation in GST:

  1. Any taxes, fees or charged levied under any other law apart from GST
  2. Expenses incurred by the buyer on behalf of the supplier
  3. Interest, late-fees or penalty
  4. Any direct subsidies or subsidies provided by the government
  5. Any other incidental expenses such as commission or packaging and handling costs incurred by the supplier.
iii) Exclusion of Discounts At the time of determining the taxable value, the taxpayer needs to exclude all the discounts from the value of supply whether it is a trade supply or a pre-supply discount. However, the discount provided post supply can also be excluded at the time of valuation for GST if the below-mentioned two conditions are met:
  1. If the discount is given as per the condition of the pre-supply agreement made between the buyer and supplier
  2. Input Tax Credit (ITC) applicable to such a discount is reversed by the buyer.


Scenarios where Valuation Rules Under GST will apply

Currently, the valuation rules GST are up on the CBEC site for the common public as they have been recently released. The common public can also comment on these rules as these rules will impact all the types of existing businesses. So, keeping the common user in mind we have bifurcated these valuations into 10 different scenarios where valuation rules will apply under GST:

  1. When consideration is not made wholly in money
  2. When there is a supply between a distinct and related person (not including an agent)
  3. When the supply is made or received through an agent
  4. When the goods are repossessed by the defaulting borrower
  5. Special provision related to the purchase or sale of foreign currency including money changing
  6. Special provision when the air tickets are booked by air travel agent
  7. Special provision related to the 2nd hand goods
  8. Special provision related to the redeemable vouchers/stamps/tokens/coupons
  9. Valuation in case of work contract services
  10. Valuation in case of the supply of lottery
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