Feb 022017

Valuation of Supplies under GST

Significance of value under GST:

As per sec 8 of the GST act all supplies within the state are liable to be taxed at the notified rate on the value determined in accordance with the sec 15 of the act. Hence, correct valuation of supply of goods and / or service is necessary to determine the tax payable by the taxable person.

What is the value of the supply:

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

If any of the above conditions are not found to really exist, the price actually paid or payable will be disregarded and valuation will be done by as per the provisions of sec 15(4).

Items to be included or excluded from the price paid or payable can be summarized as under:

Items to be included Items to be excluded
1.     Any taxes,
2.     Duties,
3.     Cesses,
4.     Fees and charges levied under any statute, if charged separately by the supplier to the recipient5.     Any amount that the supplier is liable to pay in relation to such supply but actually paid by the recipient and not specifically included in the price paid or payable6.     Incidental expensesa.     commission and packing charged by supplierb.     charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before delivery of the goods or, as the case may be, supply of the services

7.     Interest

8.     Late fees

9.     Penalty for delayed payment of any consideration

10.  Subsidies directly linked to the price are included in the value of the supply of the supplier who receives the subsidy.

1.     Fees and other charges  under {SGST Act/the CGST Act} and the Goods and Services Tax (Compensation to the States for Loss of Revenue) Act, 2016, if already charged in the price paid or payable2.     Subsidies provided by the Central and State governments3.     Subsidy directly linked to the price but received by any person other than actual supplier4.     Any discounta.     Given before or at the time of supply,b.     Recorded in the invoice issued in respect of such supply.

5.     Any discount given after the supply of goods / services if the conditions mentioned hereinafter is satisfied.

6.     Refundable deposits

Thus, formula for calculation of GST value can be written as below:

Value for calculation of GST
Particular of item sold HSN / SAC Qty Rate Amount
(A) (B) (c) (D) (E = C X D)
Item 1
Item 2
Item 3
Total SUM(Above)
Duties (if any)
Other taxes
Insurance, Packing etc
Total SUM(Above)
CGST @ __ %
SGST @ __ %

Under what circumstance discounts given after supply will be deducted from taxable turnover of the taxable person: Any trade discount or cash discount given after supply have been affected, shall not be included in the value of supply if following conditions are satisfied:

  1. Discount is established in terms of an agreement
  2. Such agreement must be entered into at or before the time of such supply
  3. Discount shall specifically linked to the relevant invoice
  4. Input tax credit has been reversed by the recipient of the supply as is attributable to the discount

What methods shall be applied in case value can’t determined as per above provisions:

  1. Comparative method
  2. Computation method
  3. Residual method

The above methods shall be applied in the sequence as provided in the law.