In this part of FAQ series, we will cover 10 questions concerning valuation of goods and services under Goods and Services Tax (GST).
Q 1. What is the value of taxable supply to be adopted for the levy of GST?
Ans. The value of taxable supply of goods and services shall ordinarily be ‘the transaction value’ which is the actually the price paid or payable, when the parties are not related and price is the sole consideration. The MGL further elaborates various inclusions and exclusions from the ambit of transaction value. For example, the transaction value shall not include refundable deposit, discount allowed before or at the time of supply.
Q 2. What is transaction value?
Ans. Transaction value refers to the price actually paid or payable for the supply of goods and or services where the supplier and the recipient are not related and price is the sole consideration for the supply. It includes any amount which the supplier is liable to pay but which has been incurred by the recipient of the supply.
Recommended Read: 10 FAQs on meaning and scope of supply
Q 3. Are there separate valuation provisions for CGST, SGST and IGST and Goods and Services?
Ans. No, section 15 is common for all three taxes and also common for goods and services.
Q 4. Is contract price not sufficient to determine valuation of supply?
Ans. Contract price is more specifically referred to as ‘transaction value’ and that is the basis for computing tax. However, when the price is influenced by some factors like relationship of parties or certain transactions are deemed to be supply, which do not have a price, it is required to overcome these factors to determine the transaction value correctly.
Q 5. Is reference to Valuation Rules required in allcases?
Ans. No. Reference to Valuation Rules is required only incases listed under section 15(4) i.e., where consideration payable is not money, or parties to the transaction are related.
Recommended Read: 10 FAQs on registration under GST
Q 6. What is to be done if there are certain factors affecting price though the transaction is not covered by section 15(4)?
Ans. Section 15(2) provides the list of adjustments that may be made to make the price of a transaction reliable for purposes of determining tax payable.
Q 7. Can the transaction value declared under section 15(1) be accepted?
Ans. Yes, it can be accepted after examining for inclusions in section 15(2). Furthermore, the transaction value can be accepted even where the supplier and recipient are related, provided the relationship has not influenced the price. (Rule 3(4) of draft GST valuation rules)
Q 8. Whether post-supply discounts or incentives are to be included in the transaction value?
Ans. Yes. Unless the post-supply discount is established as per the agreement and is known at or before the time of supply and specifically linked to relevant invoice.
Q 9. Whether pre-supply discounts allowed before or at the time of supply are includible in the transaction value?
Ans. No, provided it is allowed in the course of normal trade practice and has been duly recorded in the invoice.
Q 10. When are Valuation Rules applicable?
Ans. Valuation Rules are applicable when (i) Consideration not in money terms; (ii) parties are related or supply by any specified category of supplier; and (iii) transaction value declared is not reliable.