Finance GST 2016 Taxation

Valuation rule under GST

1. Value of supply of goods or services where the consideration is not wholly in money:

Where the supply of goods or services is for a consideration not wholly in money, the value of the supply
shall,

a) be the open market value of such supply;

b) if open market value is not available, be the sum total of consideration in money and any
such further amount in money as is equivalent to the consideration not in money if such
amount is known at the time of supply

c) if the value of supply is not determinable under clause (a) or clause (b), be the value of
supply of goods or services or both of like kind and quality

d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of
consideration in money and such further amount in money that is equivalent to
consideration not in money as determined by application of rule 4 or rule 5 in that order.

Examples:

  1. Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and if the
    price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs
    24000.
  2. Where a laptop is supplied for Rs.40000 along with a barter of printer that is manufactured by
    the recipient and the value of the printer known at the time of supply is Rs.4000 but the open market value
    of the laptop is not known, the value of the supply of laptop is Rs.44000.

2. Value of supply of goods or services or both between distinct or related persons, other than through an agent

The value of the supply of goods or services or both between distinct persons as specified in sub-section
(4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is
made through an agent, shall,-

(a) be the open market value of such supply;
(b) if open market value is not available, be the value of supply of goods or services of like kind and quality;
(c) if value is not determinable under clause (a) or (b), be the value as determined by application of rule 4 or rule 5, in that order:

Provided that where goods are intended for further supply as such by the recipient, the value shall, at the
option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person: Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services:

3. Value of supply of goods made or received through an agent

The value of supply of goods between the principal and his agent shall,-

(a) be the open market value of the goods being supplied, or at the option of the supplier, be ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient;

Examples: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and quality in subsequent supplies at a price of Rs.5000 per quintal on the day of supply. Another independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of Rs.4550 per quintal. The value of the supply made by the principal shall be Rs.4550 per quintal or where he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.

(b) where the value of a supply is not determinable under clause (a), the same shall be determined by application of rule 4 or rule 5 in that order.

4. Value of supply of goods or services or both based on cost

Where the value of a supply of goods or services or both is not determinable by any of the
preceding rules, the value shall be one hundred and ten percent of the cost of production or manufacture
or cost of acquisition of such goods or cost of provision of such services.

5. Residual method for determination of value of supply of goods or services or both

Where the value of supply of goods or services or both cannot be determined under rules 1 to 4,
the same shall be determined using reasonable means consistent with the principles and general
provisions of section 15 and these rules:
Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 4.

Apart from above there are some other special valuation rule for selected transaction like pure agent,currency exchange etc which we will discuss separately.

 

 

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