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.
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