All About Valuation – How valuation is done for supply of Goods/Services under GST

by Paras Mehra 2.64K

1.0 Introduction

Valuation is one of the most important and litigious concept under the law. Under present indirect laws, whether it is VAT, service tax, excise or any other law, valuation is the core because it is linked with the revenue of the government directly, whatever is the valuation, and the tax rate will be applied upon it. It is that figure which government wants it to be at higher side and the assessee wants it to be on a lower side and that is where the dispute occurs.

Under GST regime, valuation is based on the transaction value as in the previous laws. However, in case transaction value is not accepted then we have to refer the rules for the correct valuation. Therefore, we need to read and evaluate every important word of the section and the law. Let us move quickly on the valuation part and analyze it in depth.

 

2.0 Valuation of Supply of Goods and Services

1. The value of a supply of goods and/or services shall be the transaction value [in monetary terms], that is the price actually paid or payable for the said supply of goods and/or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

 

Value of supply of goods/services to include the following:

 

3.0 Treatment of discount on Goods/services under GST (CGST/SGST/IGST)

1. The value of the supply shall not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply.

2. The value of supply shall not include any discount which is given after the supply has been affected if

 

4.0 Analysis on Valuation of supply of goods/services

(a) The conditions that supplier and the recipient of the supply are not related and the price is the sole consideration for the supply must be satisfied together, because word ‘and’ has been used in the point no.1.

(b) From the plain reading of the section, we can observe that value of a supply of goods and/or services shall be the transaction value. However, if the value cannot be determined, then we need to proceed with the rules to calculate the value of supply.

The transaction value shall not be accepted under the following cases:

 

4.1 Price is not the sole consideration (Rule 1)

1. The transaction value shall be accepted if the price is the sole consideration. In other words, what is received or what is to be received should only be the price paid or payable to the supplier. No other consideration in any form should be payable for the supply.

2. If price is not the sole consideration for the supply, then the valuation shall be done in accordance with the rule 1 of the Valuation rules.

3. As per rule 1 of the valuation rules, where the supply of goods and services is for a consideration not wholly in money, the value of the supply shall:

 

4.2 Value of goods or services or both supplier and recipient are related (but not agent)

The value of the supply of goods or services where the supplier and recipient are related shall –

Note: To know who all are deemed to be related person under GST, kindly refer definition under section 15(5) of IGST act.

 

4.3 Value of supply of goods (NOT SERVICES) made or received through an agent

1. The value of supply of goods between the principal and his agent shall be the open market value of the goods being supplied.

However, the value shall, 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.

2. Where the value of a supply is not determinable under above clause, the same shall be determined by application of rule 4 or rule 5 in that order

 

5.0 Conclusion

Valuation is a not a easy ball game and hence any casual approach may hurt the sentiments of the business. GST will not be going to spare anyone in case of non compliance. Hence, if you have any queries or questions, ask direct to our experts by info@hubco.in.

 

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