Mar 022017
 

GST Valuation (Determination of value of supply of Goods and services) Rules 2016

Valuation norms under GST under normal circumstances:

The value taken for calculation of GST is the price actually paid by recipient of goods / service to the supplier. This shall be taken if and only if:

  1. The supplier and the recipient of the supply are not related
  2. The price is the sole consideration for the supply

The value thus identified with above formula is popularly known as transaction value under section 15(1) of the model GST law. There are specific inclusions to be made in calculating transaction value as provided under section 15(2) and some exclusions provided under section 15(3) of the act. Section 15(4) provides that where the value of the supply of goods or services cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.

Hence, GST valuation rules 2016 are come on the way to provide when valuation under 15(1) shall be disregarded and how value shall be calculated under such circumstances.

When value under section 15(1) shall be disregarded

When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any goods and/or services, he may ask the supplier to furnish further information, including documents or other evidence and if, after receiving such further information, or in the absence of any response from such supplier, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such goods and/or services cannot be determined under the provisions of sub-rule (1) of rule 3. [Rule 7(1)]

Thus, only reasons to doubt on truth or accuracy of the value are sufficient to reject the transaction value. The existence of following ingredients is sufficient to arouse existence of reasons of doubt on proper officer to reject transaction value and consider the valuation rules:

  1. The significantly higher value at which goods and/or service of the like kind or quantity are supplied
  2. The significantly lower or higher value of the supply of goods and/or services compared to the marker value
  3. Mis-declaration of parameters such as description, quantity, quality, year of manufacture or production

Goods or services of like kind and quantity

Goods of like kind and quantity means :- Services of like kind and quantity means
Goods which are identical or similar in1.     Physical characteristics,2.     Quality and3.     Reputation as the goods being valued, and4.     perform the same functions or5.     Are commercially interchangeable with the goods being valued6.     And supplied by the same person or by a different person services which are:1.     Identical or similar in nature,2.     Quality and3.     Reputation as the services being valued and4.     supplied by the same person or by a different person

If value can not be determine and/or in case value is determine but proper officer rejected the value, then, value shall be determine by proceeding sequentially through rules 4 to 6.

Step 1: Determination of value by comparison:

Rule 4 : Where transaction value of supply of goods or services can not be determine, value shall be determine in following manner:

  1. Transaction value of goods and/or services of like kind and quality
  2. Supplied at or about the same time to other customers,
  3. Adjusted in accordance with the provisions of sub-rule (2) which are given below:
    1. Difference in dates of supply
    2. Difference in commercial level
    3. Difference in quantity levels
    4. Difference in composition
    5. Difference in quality and design
    6. Difference in freight and insurance charges depending on the place of supply

When value can not be determine under rule 4:

  1. Goods and/or services of like kind and value are not available
  2. If they are available, but adjustments as required in point no 3 above can not be made

Step 2: Computed value method

If value can not be determined under rule 4 value shall be calculated under computed value method which shall be determined as below:

  1. The cost of production, manufacture or processing of the goods or, the cost of provision of the services;
  2. Charges, if any, for the design or brand;
  3. An amount towards profit and general expenses equal to that usually reflected in supply of goods and/or services of the same class or kind as the goods and/or services being valued which are made by other suppliers.

Sensys

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