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How to Calculate Value of Supply in GST?

The Goods and Services Act, GST is going fast and penetrating deep into the society every passing day.

Being a new indirect tax regime in itself, it is bound to have its fair share of queries, complexities and turmoil around it.

One of the latest queries haunting the business society is about the process and the methodology of calculating the valuation of supply in GST – what’s included, what’s not and a bunch of hows’ too.

The pre GST structure of calculating the value of supply looked like the below:

 

Tax

Value of goods/services [supply]

Excise

Transaction value of goods or MRP

VAT

Sale Value

Service tax

Taxable value of service rendered

 

The current GST provisions direct the valuation of supply to be charged on the ‘transaction value’. The price actually paid / payable for the supply of goods and / or services is termed as the transaction value.

The value of supply in GST applies to:

  • Any taxes, cess, duties, charges and fees levied under any act but GST. Composition cess is excluded if the supplier has separately charged it.
  • Any amount that is liable to be paid by the supplier and which has been borne by the recipient but is not a part of the price.
  • All incidental expenses with respect to a sale like packing, commission etc. form a part of the value of supply.
  • The value of supply also engulfs all the subsidies linked to supply barring government.
  • The value of supply will also include any interests/late fees/penalties.

Say for instance,

Laxmi Manufacturers, an engineering equipments maker and seller, sells a motor to his distributor for Rs. 12,500 with a MRP of Rs. 19,000. The value of this supply will be calculated as under:

 

Motor

12,500

Excise @12.5%

1500

Sub-total

14,000

Vat @ 14.5% on sub-total

2030

Total [Sub-total+VAT]

16,030

 

The new GST calculation of supply on the same example will work like this:

 

Motor

12500

Add: CGST @ 9%

1125

Add: SGST @ 9%

1125

Total

14750

Discounts:

The discounts in GST will be handled in a changed way altogether. The discounts provided before or at the time of supply will be permissible as a deduction from the transaction value. On meeting certain conditions, the discounts after the time of supply can also be considered.

Valuation of supply for non INR transactions:

When an exporter raises an invoice in the foreign currency, the IGST charged, if any, would get converted into INR using the RBI exchange rate. The RBI exchange rates also apply, while converting the invoice of import supplies [in foreign currency], which attract reverse charge.

Another component which plays a crucial role is the time of supply of goods and services also pays a critical role in the GST invoicing, the rules for which has been softened recently.

Should you still be confused about any intricacies about calculating value of supply and want to consult an expert, the proficient team at Masters India, a GST Suvidha Provider is here to help. autoTax from Masters India, a GST Suvidha Provider is a fully automated GST software, which along with other numerous functionalities also ensures that you always stay on top of it and be in the good books of the government by maintaining a high GST compliance rating. To explore, how can you put your taxation life cycle on an auto-pilot, please connect with Masters India at  info@mastersindia.co  | 1800 212 6141

About Masters India - GST Suvidha Provider

Masters India, a leading GST Suvidha Provider (GSP) offering GST & EWay Bill Compliance Solution and APIs to make businesses in India GST Ready.