VALUATION

GST is payable on ad-valorem basis, i.e. percentage of value of the supply of goods or services.

Taxable value under GST Law is the Transaction Value, i.e. price actually paid or payable, provided the supplier and the recipient are not related and price is the sole consideration.

In the normal trade, the invoice value is the transaction value.

There are certain compulsory inclusions viz. any taxes, fees, charges levied under any law other than GST Law, expenses incurred by the recipient on behalf of the supplier, interest, late fees for delayed payments, direct subsidies (except Government subsidies) etc.

Discounts recorded in the invoices i.e. pre-supply discounts are allowed to be excluded while determining the value.

Discounts provided after the supply can also be excluded subject to two conditions:

1. Discount is established in terms of a pre-supply agreement between the supplier and the recipient and such discount is linked to relevant invoices.
2. ITC attributable to discounts is reversed by the recipient.

Where consideration for supply is not solely in money, taxable value has to be determined as per Valuation Rules. In such cases, following values have to be taken sequentially to determine the taxable value.

1. Open Market Value of such supply;
2. Monetary Consideration + money value of the non-monetary consideration.
3. Value of supply of like kind and quality
4. Value of supply based on cost. i.e. cost of supply + 10% mark-up
5. Best Judgement Method.

Value of supply between distinct & related persons (excluding agents) – Values have to be taken sequentially to determine the taxable value:

1. Open Market Value
2. Value of supply of like kind and quality;
3. Value of supply based on cost (cost of supply + 10% mark- up)
4. Best Judgement Method.

Separate provision is made for determination of value of supply of goods made or received through an agent i.e. Open Market Value of goods being supplied, or at the option of the supplier 90% of the price charged for the supply of goods of like kind or quality by the recipient of supply to his unrelated customer.

In case, value cannot be determined in the above manner, following values have to be taken sequentially to determine the taxable value:

1. Value of supply based on cost, i.e. cost of supply + 10% mark-up
2. Best Judgement Method.

The expenditure and costs incurred by the supplier as a pure agent of the recipient of supply of service has to be excluded from the value of supply subject to fulfilment of certain conditions.

Methods have been prescribed to determine taxable value in respect of following five specific supplies:

1. Purchase or sale of foreign currency including money changing;
2. Booking of tickets for air travel by an air travel agent
3. Life Insurance Business
4. Value of supply of second-hand goods
5. Value of redeemable vouchers/stamps/coupons/tokens.