Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Introduction:
GST will be ne tax to subsume all taxes. It will bring in “One nation One Tax”
regime.
Being a completely new form of indirect taxation there are many questions in the
minds of the organizations. One of the most important questions is what is valuation of
supply under GST? What will be included in the value of taxable supply on which GST is
calculated?
Earlier Regime
In the earlier regime, taxes are calculated on the value of goods/ services:
Value Value of Goods/Services
Excise Transaction value of goods or MRP
VAT Sale Value
Service Tax Taxable Value of Service Rendered

Determination of value of supply is very important to determine tax liability. In

GST, tax is calculated on certain percentage of value of the supply of goods or services.
Value of Supply is nothing but the amount on which tax is levied and collected.
Therefore, it is important to calculate the value on which tax is to be paid.
Section 15 of the CGST Act provides the mechanism to determine the value of supply
which is made between unrelated persons and when price is the sole consideration.
However, when value cannot be determined u/s 15, the value is determined by
using rules framed in Chapter IV i.e., Determination of Value of supply of CGST Rules.

Meaning:
Value of Supply means the amount paid by the recipient of supply to the supplier
as consideration for supply.
In simple, valuation of supply means the amount paid by buyer to seller as
consideration of goods.
Ex:Mr. A buys computer from Mr. B, the seller. Mr. A pays amount of Rs. 25,000
as consideration for computer purchased.

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Relevant Definition:
Recipient {Sec. 2 (93)}
Recipient of Supply of goods and services or both, means-
a) Where a consideration is payable for the supply of goods or services or both, the
person who is liable to pay that consideration.
b) Where no consideration is payable for the supply of goods, the person to whom
the goods are delivered or made available, or to whom possession or use of the
goods is given or made available and
c) Where no consideration is payable for the supply of a service, the person to
whom the service is rendered, and any reference to a person to whom a supply is
made shall be construed as a reference to the recipient of the supply and shall
include an agent acting as such on behalf of the recipient in relation to the goods
or services or both supplied.

Supplier: {Sec. 2(105)}

Supplier in relation to any goods or services or both, shall mean the person
supplying the goods or services or both and shall include an agent acting as such on
behalf of such supplier in relation to the goods or services or both supplied.

Goods: {Sec. 2(52)}

Goods means every kind of movable property other than money and securities
but includes actionable claim, growing crops, grass and things attached to or forming
part of the land which are agreed to be severed before supply or under a contract of
supply.

Services:{Sec. 2(102)}
Services means anything other than goods, money and securities but includes
activities relating to the use of money or its conversion by cash or by any other mode,
from one form, currency or denomination, to another form, currency or denomination
for which a separate consideration is charged.

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Voucher: {Sec. 2(118)}

Voucher means an instrument where there is an obligation to accept it as
consideration or part consideration for a supply of goods or services or both and where
the goods or services or both to be supplied or the identities of their potential suppliers
are either indicated on the instrument itself or in related documentation, including the
terms and conditions of use of such instrument.

Market Value:{Sec. 2(73)}

Market Value shall mean the full amount which a recipient of a supply is required
to pay in order to obtain the goods or services or both of like kind and quality at or
about the same time and at the same commercial level where the recipient and the
supplier are not related.

Money:{Sec. 2(75)}
Money means the Indian Legal Tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque,
money order, postal or electronic remittance or any other instrument recognised by the
RBI when used as a consideration to settle an obligation or exchange with Indian Legal
Tender of another denomination.

Agent:{Sec. 2(5)}
A person, including a factor, broker, commission agent, arhatia, del credere
agent, an auctioneer or any other mercantile agent, by whatever name called, who
carries on the business of supply or receipt of goods or services or both on behalf of
another.

Person:{Sec. 2(84)}
Person includes –
a) An individual
b) A Hindu Undivided Family;
c) A Company;
d) A Firm;
e) A Limited Liability Partnership;
f) An association of persons or a body of individuals, whether incorporated or
not, in India or Outside India;

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g) Any corporation established by or under any Central Act, State Act or

Provincial Act or a Government Company as defined in Section 2(45) of the
Companies Act, 2013;
h) Anybody corporate incorporated by or under the laws of a country outside
India;
i) A co-operative society registered under any law relating to cooperative
societies;
j) A local authority;
k) Central govt. or a State Govt.
l) Society as defined under the Societies Registration Act, 1860.
m) Trust and
n) Every artificial judicial person, not falling within any of the above

Consideration:
Consideration may be in the form of money or it may be kind also.

In simple terms, consideration may be in cash, kind, forbearance and many more.
There should be direct link between the supply and payment.

If there is no direct link between the supply and payment or there is no supply of
goods or services in return for payment, then the payment is not treated as
consideration.

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Types of Consideration:
Consideration can be in monetary or non-monetary form.
a) Monetary Consideration: means payment made by way of cash, cheque or
credit card, bank transfer and deduction from bank account.
b) Non-monetary consideration: means goods or services provided as payment.
For example, in barter exchange.
c) Consideration received in Partly money and Partly in Kind

Note: Every payment is not consideration

Donation, government grants, sponsorship amount, deposit

Valuation of Taxable Supply (Sec. 15)

According to Sec. 15 (1) the value of a supply of goods or services or both shall
be the transaction value.

Transaction Value means the price actually paid or payable for the said supply
where the supplier and the recipient of the supply are not related and the price is the
sole consideration for the supply.

Generally, the invoice value will be considered as taxable value.

1. General Rule
Basic Condition for Valuation of Supply

Valuation of Supply

Transaction Value

Supply is between Price is the sole

unrelated persons consideration

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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Consideration = Value of Supply + GST on Value of Supply

*Value of Supply = Consideration – GST on Value of Supply

Open Market Value: Means the value of supply excluding taxes, payable by a recipient
at the time when supply being valued is made, provided such supply is between
unrelated persons and price is the sole consideration for such supply.

Example: Mr. Arun sold furniture to Mr. Bhavesh for Rs. 10,000. The open market value
of the furniture is 13,000. Mr. Arun and Mr. Bhavesh are not related persons.

Here, first condition is satisfied that, supplier and recipient are not related
person and hence, value of supply will be Rs. 10,000.

In the above example, suppose Mr. Arun and Mr. Bhavesh are related person.

Here, both the conditions are not satisfied. Hence, value of supply will be
open market value i.e., Rs. 13,000

Supplies to unrelated persons where price is the sole consideration.

Inclusions in Value of Supply (15 [2])

a) Any taxes, duties, cesses, fees and charges levied under any law other than
GST Law
Ex: Freight, Municipal Taxes
b) Any expenses incurred by the recipient of the supply on behalf of the
supplier
Ex: Delivery Charges
c) Incidental expenses such as commission, packing, inspection or
certification charges, installation and testing charges, charged by the
supplier
d) Interest or late fee or penalty for delayed payment; and
e) Subsidies directly linked to the price excluding subsidies provided by the
Central Government and State Government

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Note: The amount of subsidy will be included in the value of supply of the supplier
who receives the subsidy.

Exclusions of discount from discount value

a) Discount provided before or at the time of supply like trade discount,

quantity discount etc. is part of normal trade and commerce. Therefore,
discounts shown in the invoice have to be excluded from the value of
supply
b) Discounts provided after the supply can also be excluded, if
i) Discount is established in terms of a pre supply agreement
between the supplier and the recipient and such discount is
linked to relevant invoices.
ii) Input tax credit attributable to the discounts has been reversed
by the recipient.

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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

1. Galaxy Pvt. Ltd. sold goods to Ooty Pvt. Ltd. and provides the following particulars

Particulars Amount
List price of the goods 1,00,000
Municipal Tax 12,000
GST 28,000
Packing Charges 1,500
Inspection or certification Charges 800

Galaxy Pvt. Ltd. received Rs. 2,500 as a Subsidy from NGO on such supply. Galaxy
Pvt. Ltd. allows 3% discount on the list price which is shown in the invoice. Determine
the value of supply.
Solution: Determination of Value of Supply
Particulars Amount Amount
List Price of the Goods 1,00,000
Add: Items 15(2)
Municipal Tax 12,000
Packing Charges 1,500
Inspection or certification Charges 800
Subsidy from NGO 2,500 16,800
Value 1,16,800
Less: Items 15(3)
Discount @3% (Rs.1,00,000 x 3/100) 3,000
Taxable Value of Supply 1,13,800

ABC Ltd has provided the following details regarding sale of machinery supplied by it
to XYZ Ltd :

Particulars Amount

List price of goods (excluding taxes and discounts) 70000

Packing charges at the request of customer 5000

Municipal taxes levied on such sale 2000

Subsidy received from Central Government 1000

Freight and insurance from place of removal to the supplier’s premises 750

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A cash discount of 1% on the list price was agreed to be offered to XYZ Ltd if it
agreed to make immediate payment. As XYZ makes the payment, determine the
value of such supply.
Solution :

Particulars Section Amount

reference

List price of goods (excluding taxes and discounts) 15(1) 70000

Add:Packing charges at the request of customer 15(2)(c) 5000

Municipal taxes levied on such sale 15(2)(a) 2000

Subsidy received from Central Government 15(2)(e) Nil

Freight and insurance to the supplier’s premises 15(2)(c) 750

Less:Cash discount @ 1% on list price 15(3)(a) (700)

77050/-

2) Special Valuation Rules:

These rules can be applied in cases where, the price is not sole consideration or
consideration received not full in money or supply between related or distinct persons.
These rules applicable in cases where supply of goods or services or both will
made against consideration not wholly in money or cash. These rules are applicable
when;
a) The consideration received is not in money.
b) The consideration received partly in money and partly in kind
c) Value of supply between related or distinct persons
d) Value of supply of goods made or received through an agent
e) Value of supply of services in case of a pure agent.

1) Where Consideration is not wholly in money [Rule 27]:

In some cases, where consideration for supply is not in money, i.e., exchange of
goods or services, Where the supply of goods or services is for a consideration not
wholly in money, the value of the supply shall be,

i) The Open Market Value of such supply;

Note: Open Market Value (OMV):
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“Open market value” of a supply of goods or services or both means the full
value in money, excluding the integrated tax, central tax, State tax, Union territory
tax and the cess payable by a person in a transaction, where the supplier and the
recipient of the supply are not related and price is the sole consideration, to obtain
such supply at the same time when the supply being valued is made.

Open market value is a fair market value. In other words, open market value will be the
amount which is fairly available in open market.

ii) Value of supply of goods or services or both of like kind and Quality
If open market value is not available then value would be, Value of supply of
goods or services or both of like kind and Quality
Supply of like kind and quality:
Supply of like kind & quality means any other supply made under similar
circumstances, is same or closely resembles in respect of characteristics, quality,
quantity, functionality, reputation to the supply being valued.
Where consideration is not wholly in money, then the value of supply will be;

iii) Value of supply based on cost i.e., cost of supply plus 10%mark-up.
If value of supply cannot be determinable under open market value and like
kind and quality, the value will be based on cost plus mark up.
If Value of supply cannot be determinable then value is determined by using
reasonable means consistent with principles & general provisions of GST law. (Best
Judgment method).

Value of supply = Open market value of supply - GST on open market value
OR
Open market value / fair market value XX
Less: GST on OMV
OMV X GST rate
100+ rate of GST XX
Value of supply XXX

Example: Sai Electronics supplied printer to Khan, Khan has transferred a computer
monitor to Sai electronics as consideration for printer. The market price of printer is
Rs.12000 including GST 18%. Determine value of supply.

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Solution: Computation of Value of Supply

Open market value / fair market value 12,000
Less: GST on OMV 12,000x18/118 1,831
Value of supply 10,169

b) Taxable value when consideration is partly in money and partly in kind.

In some cases, where consideration for a supply is partly in money and party in
kind, taxable value has to be determined as prescribed in the rules.
In such cases following values have to be taken sequentially to determine the
taxable value:
i) Open Market Value of such supply
ii) Total money value of the supply i.e., monetary consideration
plus money value of the non-monetary consideration
iii) Value of supply of like kind and quality
iv) Value of supply based on cost i.e., cost of supply plus 10% mark-up
v) Value of supply determined by using reasonable means
consistent with principles and general provisions of GST law.
(Best Judgment method).

Example: Rangu is a carpenter, he purchased a wood working machine from Utshav

manufacturer. The sale price of machine is Rs 3,00,000 excluding GST. Rangu paid Rs.
2,00,000 in cash and supplied furniture to Utshav manufacturer for remaining amount
as consideration. The money value of furniture is Rs.1,20,000. Determine value of
supply.

Solution: Computation of Value of supply

Monitory consideration Rs. 2,00,000
Add: Non-monitory consideration Rs. 1,20,000
Value of supply Rs. 3.20,000

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2) Value of supply between related or distinct persons [Rule28]:

A person who is under influence of another person is called a related person like
members of the same family or subsidiaries of a group company etc.
As per section 25(4) of the CGST Act 2017, a person who has obtained more than
one registration whether in one state or union territory one more than one state or
union territory shall, in respect of each of such registration, be treated as distinct
person.

GST law various categories of related persons have been specified and as relation
may influence the price between two related persons therefore special valuation rule
has been framed to arrive at the taxable value of transactions between related persons.
In case of supply between such related person and distinct person under GST,
value of supply will be:
i) The Open Market Value (OMV) of such supply. OMV will be the amount which
is fairly available in open market.
ii) If the open market value is not available, it will be the value of supply of goods
or services of like, kind and quantity.
iii) If the value is not determinable in the above two cases it shall be determined by
the value of supply based on cost of supply plus 10% mark-up.
iv) If the value is not determinable in the above two cases it shall be determined by
using reasonable means consistent with principals and general provisions of
GST law. (Best Judgment Method).

Example: Ganga Soft Drinks, Ganga Minerals and Ganga Bottles are the units of Ganga
Industries Limited. Each of these units has separate legal entity and located in different
areas in Karnataka.
Ganga Bottles supplied 1,00,000 quantity of bottles to Ganga Soft drinks unit. The cost
price of making each bottle is Rs. 3.
Determine the value of supply of 1,00,000 quantity of bottles.
If;
a. The market value of each bottle is Rs.5
b. What would be your answer, if market value of each bottle is not available?

Solution:

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a) Computation of Value of Supply (Open Market Value)

The Open Market Value will be the value of Supply i.e.,
Rs. 5 x 1,00,000 = Rs. 5,00,000

b) Value of Supply (if Market Value is not Available)

Cost Price of Bottles (1,00,000 x Rs. 3) = Rs. 3,00,000
Add: 10% Mark-Up (3,00,000 x 10/100) = Rs. 30,000
Value of Supply = Rs. 3,30,000

3) Value of supply of goods made or received through an agent [Rule-29)

According to Rule 29 CGST Act, 2017, the value of supply of goods between the principal
and his agent will:

i) be the Open Market Value of such supply

ii) At the option of the supplier, 90% of the amount charged by the recipient from
his customer, being unrelated person.
iii) If the value of supply is not determinable as above, Value of supply will be
determined as per rule 30 & 31,

Example: A principal supplies product to his agent for Rs. 7500 and the agent is
supplying products of like kind and quality to his customer for Rs. 10,000. Determine
the value of supply.

Solution:
As per rule 29 - The value of supply of goods between the principal and his agent
will be the Open Market Value. If the Open Market Value of supply is not available, then
the value of supply will be 90% of the amount charged by the recipient from his
customer, being unrelated person.

In the given case, agent is supplying products of like kind and quality to his
customer for Rs. 10,000. Hence, value of supply will be 90% of 10,000 = Rs.9.000.

4) Cost Method - Value of supply of goods or services or both based on cost: [Rule
30]
If value of supply of goods & services are not determined according to Rule 27 to

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Rule 29, then the value of supply will be 110% of the cost of production, cost of
acquisition of goods or services.

Example: Mr.X sold a laptop for Rs. 44,000 with exchange of old Computer. Cost of the
laptop is Rs. 50,000. Determine the taxable value of supply.

Solution:
As per Rule 30 If value of supply of goods & services are not determined according to
Rule 27 to Rule 29, then the value of supply will be 110% of the cost of such supply.
In the given case, Open Market Value of the laptop as well as old computer is not
available. Also, Value of like kind of laptop is not available. Hence, the
taxable value of supply will be 110% of the cost of laptop i.e. 110% of 50,000 =
Rs. 55,000.

5) Residual Method for determination of value of supply of goods or

services. [Rule 31]

If value of supply of goods & services are not determined under Rule 27 to Rule
30, then value of supply shall be determined using reasonable means consistent with
the principles and general provisions of this chapter.

6) VALUATION OF SUPPLY IN SOME SPECIAL CASES: Rule 32 of COST Rules 2017,

provides the general provisions relating to determination of value of supply in respect
of certain specific supplies of services and goods.

The valuation methods provided under this rule are optional. The supplier can
use them if he so desires. He can also select to value his supplies as provided in other
valuation rules. The following are the few supplies have been prescribed under
valuation rules of CGST Rule 2017;

1. Purchase and sale of foreign currency including money changing

2. Booking of tickets for air travel by an air travel agent.
3. Life Insurance business.
4. Supply of second-hand goods.
5. Redeemable vouchers or stamp or coupons or tokens.

1. Purchase and sale of foreign currency including money changing

The value of services in relation to the purchase or sale of foreign currency including
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money changing is provided in Rule 32(2)(a) of CGST Rule 2017. The value of
services in such case shall be determined by either of the following two methods;
Method 1. (Under Rule 32 (2) (a))

Under Method 1 for determining value of services in relation to purchase or sale

of foreign currency including money changing has two situations:

a. Situation 1. Transaction where one of the currencies exchanged is Indian

Rupee.
b. Situation II. Transaction where neither of the currencies
exchanged is Indian Rupee.
c. Situation I : Transaction where one of the currencies exchanged is Indian Rupee.
For a currency, when exchanged from or to Indian Rupees (INR), the value shall be
equal to the;
1. Purchase of foreign currency by services supplier. Value of supply (services) =
(RBI reference rate - Buying rate) x Total units of currency
2. Sale of foreign currency by service supplier.
Value of supply (service) = (selling rate - RBI reference rate) x Total units of
currency.

RBI reference rate is at the time of exchange: It means, the value of

supply is difference between buying rate or selling rate of currency and RBI
reference rate for that currency at time of exchange multiplied by total units of
foreign currency.

RBI reference rate is not available: If RBI reference rate for a currency is
not available, then value of supply is 1% of the gross amount of Indian Rupees
provided or received by the person changing the money.

Value of supply=1% of gross amount of Indian rupees.

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Sum: Mr. Kane Williamson converted USD $200 units on 10th December 2021 at Rs.63 per
USD through Eastern Money Changers. The RBI reference rate on that time of exchange is
Rs.64 per US $. Determine the Value of Supply. What is your answer if RBI reference rate is
not available?
(a) Value of Supply of Services - RBI Reference Rate is Available
= (RBI Reference Rate – Buying Rate) x Total Units of Currency
= (64 – 63 ) x $ 200
= Rs.1 x $ 200
= Rs. 200/-
(b) Value of Supply of Services - RBI Reference Rate is not Available
= 1% of Gross amount of Indian Rupee
= ($200 x Rs.63) x 1/100
= Rs.12600 x 1/100
= Rs. 126/-
Situation II : Transaction where neither of the currencies exchanged is Indian
Rupee.
In case where, neither of the currencies exchanged is Indian rupee, the value of
supply is 1%of the lesser of the two amounts the person changing the money would
have received by converting of any of the two currencies in Indian Rupees on that day at
the reference rate provided by RBI. That means value of supply is 1% of gross Indian
Rupee. Gross Indian Rupee is equal to the least of the following:

a. Foreign currency sold x RBI reference rate

OR
b. Foreign currency bought x RBI reference rate
Whichever less is Gross Indian Rupee.

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Method 2: (Under Rule 32 (2) (b))

Under method 2, the supplier has option to determine value in relation to supply
of foreign currency including money changing.
At the option of the supplier of services, the value shall be determined in the
following manner;
Sl. No. Currency Exchanged for an Value of Supply
amount
1. Up to Rs. 1,00,000 1% of the gross amount of currency
exchanged.
O R
Rs. 250 whichever is higher
2. Exceeding Rs. 1,00,000 and Rs. 1,000 + 0.5% of the gross amount of
Up-to Rs. 10,00,000 currency exchanged
3. Exceeding Rs. 10,00,000 Rs. 5,500 + 0.1% of the gross amount of
currency exchanged
OR
Rs. 60,000 whichever is lower.

Solution
Value of Currency Exchanged = $10,000 x Rs.79 = Rs.7,90,000
Value of Supply = Rs.1,000 +0.5% of Rs.6,90,000 (Rs.7,90,000-Rs. 1,00,000)
= Rs. 1,000 + 3,450
= Rs.4,450/-

ON Fist Rs.1,00,000 @ 1% = Rs.1,000

On Remaining Rs.6,90,000 @0.5% = Rs.3,450
Value of Supply = Rs.4,450/-

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II. Booking of tickets for air travel by an air travel agent:

The value of supply of services of booking of tickets for air travel by an air travel
agent shall be 5% of basic fare in the case of domestic booking and 10% of basic fare in
case of International travel.
Basic Fare means that on which commission is normally paid to the air travel
agent by the airline.

III. Life Insurance business:

The value of insurance policy. The value of supply of services in relation to life
insurance business is determined for the following nature of policy.

a. Policy with dual benefits: that mean, a policy which is having two benefits, benefit of
risk coverage and benefit of investment or savings. If the amount allocated for
investment or savings is intimated to the policy holder at the time of the supply of
services, the taxable value will be;

Taxable value= Gross premium charged- amount allocated for investment or savings

b. Single premium annuity policy: In case of single premium annuity policy other than
policy with dual benefits, the taxable value of supply of services will be;

Taxable value= 10% of the single premium charged from the policy holder.

c. Policy with only risk coverage: When policy with only risk coverage's the taxable
value of services will be;

Taxable value= Entire premium charged from the policy holder.

d. In other case: In all other cases 25% of the premium charged from policy holder in
the first year and 12.5% of the premium charged from the policy holder in subsequent
years.

IV. Supply of second-hand goods:

Supply of second-hand goods means dealing in buying and selling of second-
hand goods i.e used goods, as such or after such minor processing which does not

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change the nature of the goods. Second hand goods dealers deal in purchase and sale of
used goods. Second hand goods might be sold as they are or after minor renovation.
a. Outward supply of second-hand goods:
GST is normally charged on the transaction value of the goods. However in
respect of outward supply of second-hand goods, the dealer is liable to charge GST
on the second-hand goods. For charging GST dealer will have two options;
1. Charge GST on the full transaction value OR
2. Charge GST on the margin or profit earned on the goods.
b. Inward supply of second-hand goods:
When a registered second-hand goods dealer buys used unregistered person goods,
the supply can be either from a registered person or Unregistered person.
I. Inward supply from registered person.
When a registered second hand goods dealer purchases used goods from a
registered person, the supplier is liable to charge tax at the rate applicable to such
goods, if he opts for margin scheme, the dealer cannot claim input tax credit of the
tax paid.
II. Inward supply from unregistered person.
When a registered second hand goods dealer purchases used goods from an
unregistered person, the recipient is liable to pay tax on reverse charge. If the dealer
opts for the margin scheme, the dealer will not be liable to pay tax on reverse charge
on inward supplies from unregistered persons.
Note: GST on second hand goods received from unregistered supplier is exempt
from tax.
V. Redeemable vouchers or stamp or coupons or tokens:
The value of a token, voucher or coupon or a stamp (other than postage stamp)
which is redeemable against a supply of goods and services or both is equal to the
money value of the goods or services or both redeemable against such token, voucher,
coupon or stamp.

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VALUE OF SUPPLY OF IMPORTED GOODS:

The import of goods has been defined in the IGST Act 2017, Import of goods
means bringing goods into India from a place outside India. The place of supply of goods
imported into India shall be the location of the importer. Under GST regime the supply
of goods or services or both in course of import into the territory of India shall be
deemed to be supply of goods or services or both in course of interstate trade for levy of
integrated tax. So, import of goods or services would be treated as deemed interstate
supply and would be subject to integrated tax in addition to the applicable Custom
Duties. Levy of IGST on import of goods would be levied under the customs Act 1983
read with the customs Tariff Act 1975.
Provisions of IGST Act, 2017 relating to levy of taxes on import of goods:
The following are the provisions of IGST Act in relating to levy of taxes on imports of
goods;
1. Import of goods (Section 2(10) of IGST Act 2017:
Import of goods means bringing goods into India from a place outside India
2. Import of goods deemed to be interstate supply (section 7(2)] : supply of goods
imported into the territory of India, till they cross the customs frontiers of India, shall be
treated to be a supply of goods in the course of interstate trade or commerce.
Customs frontiers of India means the limits of a customs area as defined in
section 2(11) of the customs Act 1962.
Custom Area as per section 2(11) of Customs Act 1962 means, “The area of a
customs station and include any area in which imported goods or exported goods are
ordinarily kept before clearance by customs Authorities."
3. Place of supply of goods imported into India (section 11 of IGST hot 2017): the place
of supply of goods imported into India shall be the location of the importer.
4. Tax on Import of goods (section 5 of IGST Act 2017): the integrated tax i.e., IGST on
goods imported into India shall be levied and collected.
 In accordance with the provisions of Section 3 of the Custom Tariff Act, 1975
 On the value as determined under the Customs Tariff Act, 1975
 At the point when duties of Customs are levied on the said goods under section 12
of the Customs Act, 1962.

5. Addition of other duties:

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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

The integrated tax (GST) on goods shall be in addition to the applicable Basic Customs
Duty (BCD) which is levied as per the Customs Tariff Act. In addition, GST compensation
cess, may also be levied on certain luxury and demerit goods under the Goods and
Service Tax compensation to states) Cess Act.2017.
6. Value of supply for the purpose of levy of tax (IGST) on imported goods:
The value of the goods for the purpose of levying IGST shall be assessable value
plus customs duty levied under the act and any other duty chargeable on the said goods
under any law for the time being in force as an addition and in the same manner as a
duty of customs. The value of the goods for the purpose of levying integrated tax shall
be;
Assessable value = xxxx
Add: Customs Duty levied under Customs Act = xxxx
In addition, GST compensation cess, may also be levied on certain luxury and demerit
goods under the goods and service tax ( compensation to states) Cess Act 2017 on the
assessable value plus Basic customs Duty (BCD).
7. Input tax credit:

Input tax credit of the integrated tax paid at the time of import shall be available
to the importer and the same can be utilized by him as input tax credit for payment of
taxes on his outward supplies. However, the basic customs duty (BCD) shall not be
available as input tax credit.

IMPORT OF SERVICES:

Import of services has been specifically defined under IGST Act. And refers to
supply of any services where the supplier is located outside India, and recipient is
located in India and the placeof service in India.
Import of services section 2(11) of IGST Act 2017, import of services means the
supply of any services where; Supply of any services where the supplier is located
outside India.

The recipient of service is located in India and the place of supply of service is in India
Provisions of IGST Act, 2017 relating to levy of taxes on import of services:
1. Import of services under consideration, whether or not in the course or furtherance
of business, shall be considered as a supply. Business test is not required but
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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

consideration test is required to be fulfilled for import of service to be considered as

supply.

1. Import of services by a taxable person from a related person or from a distinct

person as defined in Section 25 of the CGST Act, 2017, in the course or furtherance of
business shall be treated as supply even if it is made without any consideration.
Thus, in this case, Business test is required but consideration test is not required to
be fulfilled for import of service to be considered as supply.
2. Section 21 of IGST Act, 2017:Imports of services made on or after the appointed day
i.e. 1st July, 2017 will be liable to integrated tax regardless of whether the
transactions for such import of services had been initiated before the appointed day.
3. If the tax on such import of services had been paid in full under the existing law, no
tax shall be payable on such import under the IGST Act.
4. In case the tax on such import of services had been paid in part under the existing
law, the balance amount of tax shall be payable on such import under the IGST Act.

Department of Commerce, KLE Society’s, Lingaraj College, Belagavi (Autonomous) 22

 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Sums (1)
Determine GST payable from the following information provided by Sagar Ltd has made
sale to Ocean Ltd.
Particulars Amount
List price of product (including 12% GST) 1,12,000
The list price of the produce includes
Cost of durable and returnable package 2,500
Cost of normal package 3,000
The list price of product does not include
Freight and insurance 1,500
Advertising expenses 4,000
Loading and unloading charges 3,000
Free samples 1,000

Other Information:
Sager Ltd Offers trade discount at 5% on list price before GST.
Solution
Particulars Amount (Rs.) Amount (Rs.)
List price of the product (including 12% GST) 1,12,000
Less: GST @ 12% (Rs.1,12,000 x 12/112) 12,000
List Price of Product 1,00,000 1,00,000
Add: Inclusions 15(2)
Freight and Insurance
1,500
Advertising Expenses
4,000
Loading ad Unloading Charges
3,000
Free Samples
1,000 9,500
1,09,500
Less: Exclusion 15(3)
Trade Discount @5 % on List price 5,000
(Rs.1,00,000 x 5/100)
Cost of Durable and Returnable Package 2,500 7,500
Value of Taxable Supply 1,02,000

Computation of GST Payable

Particulars VoS IGST CGST SGST
Supply to Ocean Ltd. (12%) 1,02,000
CGST @ 6% -- 6,120 6,120
SGST @ 6%

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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Sum (2) Modern Pvt Ltd has provided the following particulars relating to goods sold by
it to Old Pvt. Ltd.
Particulars Amount
List price of product (including 18% GST) 4,72,000
The list price of goods also includes:
Cost of primary packing 30,000
Design and engineering cost 60,000
Protective Packing 40,000

Other Information
1) Commission paid to agent by recipient on instruction of supplier Rs.8,000
2) Loading and unloading charges Rs.5,000
3) Modern Pvt. Ltd offers 5% discount to customer on purchase but same not
recorded in the invoice.
4) Modern Pvt. Ltd. Received subsidy from Government of Karnataka Rs.10,000
which is not linked with price.
18% GST applicable.

Sum (3) Anvita Ltd. A registered supplier in Mumbai (Maharashtra) has supplied goods
to Uttam Traders and Vedha Motors Ltd. Located in Pune and Bengaluru respectively.
Anvita Ltd. has furnished the following details for the month of August 2022.
Particulars Uttam Vedha
Trader Motors
1) Price of goods (excluding GST) 40,000 30,000
2) Packing Charges 1,200 --
3) Commission 800 --
4) Weighment Charges -- 2,000
5) Discount for prompt payment recorded in invoice - 1,200
Items given in point 2 to 5 have not considered while arriving at price of the goods
given in point 1 above.
Compute the GST liability for the month of August 2022. Assume the rate of taxes to be
as 18%.
Particulars Uttam Vedha
Trader Motors
Price of Goods 40,000 30,000
Add: Inclusions 15(2)
Packing Charges 1,200 --
Commission 800 --
Weighment Charges -- 2,000
42,000 32,000
Less: Exclusions 15(3)
Discount for prompt payment -- 1,200
Value of Taxable Supply 42,000 30,800

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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Computation of GST Payable

Particulars VoS IGST CGST SGST
Supply to Uttam Trader, Pune
CGST @ 9% and SGST@9 % 42,000 -- 3,780 3,780
Supply to Vedha Motors, Bengaluru
IGST @ 18% 30,800 5,544 -- --
Total GST Liability 5,544 3,780 3,780

Department of Commerce, KLE Society’s, Lingaraj College, Belagavi (Autonomous) 25

 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Sum : Aptech Computer Seller of Personal Computers in Belagavi. The following are
computer parts purchased during the month August 2022.
a) 100 Monitors from a dealer of Sony. Price of each monitor is Rs.4,000 (Including
28% IGST)
b) Purchased 100 CPU from a dealer of Hubli. Price of each CPU is Rs.14,000
(including GST @ 18%)
c) Purchased 100 keyboards and mouse from a dealer in Belagavi. Price of each
keyboard is Rs.500 and mouse is Rs.200 (including GST @18%)
d) Purchased 100 Operating Software from Vadiraj Infotech Belagavi of Rs.2000
each (including GST @18%)
The following are the expenses incurred by it to assemble the Computers.
Labour Cost Rs.20,000
Other expenses Rs.10,000
Profit margin at 30% on cost of each Personal Computer.
1. Calculate selling price of each Personal Computer
2. Determine Transaction value for the following sales, by using calculated
selling price.
a. 25 Computers to Lingaraj College, Belagavi
b. 35 Computers to a customer in Bengaluru
c. 15 Computers to Gogte College, Belagavi.
d. 25 Computers to a customer of Koppal
The above sales do not include the following:
Cost of primary packing Rs.60,000
Cost of Secondary Packing Rs.90,000
It provides 5% discount on selling price of each computer.
Calculate GST payable @ 18%.

Calculation of Selling Price of Personal Computer

Particulars Qty Rate Total
Monitors 100 4,000 4,00,000
CPU 100 14,000 14,00,000
Keyboards 100 500 50,000
Mouse 100 200 20,000
Operating Software 100 2,000 2,00,000
Total 20,70,000
Add: Labour Cost 20,000
Other Expenses 10,000 30,000
Total Cost 21,00,000
Add: Profit margin @30% on Rs.21,00,000 6,30,000
Total Sale Price 27,30,000
Selling price per computer = Sale Price/ 100
27,30,000/100
Rs.27,300/- Per Computer

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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Calculation of Transaction Value

Particulars Amount Amount
Sales:
a. 25 Computers to Lingaraj College, Belagavi 6,82,500
b. 35 Computers to a customer in Bengaluru 9,55,500
c. 15 Computers to Gogte College, Belagavi. 4,09,500
d. 25 Computers to a customer of Koppal 6,82,500 27,30,000

Add: Inclusions 15(2)

Cost of primary packing 60,000
Cost of Secondary Packing 90,000
Total 28,80,000
Less: Exclusions 15 (3)
Discount allowed at 5% on selling price 1,36,500
(Rs. 27,30,000 x 5/100)
Taxable Value of Supply 27,43,500

Calculation of Input Tax Credit Available

Particulars IGST CGST SGST
Monitor (Rs.4,00,000 x 28/128) 87,500 -- --
CPU (Rs.14,00,000 x 18/118) -- 1,06,780 1,06,780
Key Boards (Rs.50,000 x 18/118) -- 3,814 3,814
Mouse (Rs.20,000 x 18/118) -- 1,525 1,525
Operating Software -- 15,254 15,254
(Rs.2,00,000 x 18/118)
Total ITC Available 87,500 1,27,373 1,27,373

Calculation of Output Tax Liability

Particulars IGST CGST SGST
Output Tax Liability on Intra State Sale -- 2,46,915 2,46,915
(Rs.27,43,500 x 18/100 x 1/2)
Less: ITC Available 87,500 1,27,373 1,27,373
(87,500) 1,19,542 1,19,542
Less: IGST against CGST 87,500 87,500 --
GST Payable Nil 32,042 1,19,542

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 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Sum : Mr. Nimit a supplier of goods, pay GST under regular scheme. He is not
eligible for any threshold exemption. He has made the following outward
supplies in the month of August 2022.
Intra State Supplies of Goods Rs.6,00,000
Inter State Supplies of Goods Rs.2,00,000
He has also furnished following information in respect of purchases made by him
from registered dealer during August 2022.
Intra State purchases of goods Rs.4,00,000
Inter State Purchases of goods Rs.50,000
Balance of ITC available at the beginning of August 2022: IGST Rs.20,000, CGST
Rs.15,000 and SGST Rs.35,000
Other information:
1. Rate of GST is 18%.
2. Both inward and outward supplies given above are exclusive of taxes,
wherever applicable.
3. All the conditions necessary for availing the ITC have been fulfilled.

Calculation of Input Tax Credit Available `

Particulars IGST CGST SGST
Opening Balance on August 2022 20,000 15,000 35,000
Add: ITC on purchases
Intra State Purchases of Goods -- 36,000 36,000
(Rs.4,00,000 x 18/100)
Inter State Purchases of Goods 9,000 -- --
(Rs.50,000 x 18/100)
Total ITC Available 29,000 51,000 71,000

Calculation of Output Tax Liability

Particulars IGST CGST SGST
Intra State outward supply of goods -- 54,000 54,000
(Rs.6,00,000x 18/100 x 1/2)
Inter State outward supply of goods 36,000 -- --
(Rs.2,00,000x 18/100)

Total Tax Liability 36,000 54,000 54,000

Less: ITC Available 29,000 51,000 71,000
7,000 3,000 -17,000
Less: SGST Against IGST 7,000 -- 7000
GST Payable Nil 3,000 (10,000)

Department of Commerce, KLE Society’s, Lingaraj College, Belagavi (Autonomous) 28

 Goods and Services Tax [UNIT IV: VALUE OF SUPPLY]

Sum: From the following details of Arya Traders of Bengaluru compute GST Payable.
a) Intra State Outward Supply of goods worth Rs.10,00,000 @18% GST. Which was
purchased from X Ltd. for which Arya Traders paid CGST Rs.48,000 and SGST
Rs.48,000.
b) Inter State supply of services of Rs.1,00,000 to Raghu. IGST charged at 18%.
c) It has made outward supply of goods to SEZ unit of Belagavi Rs.7,00,000. Arya
Traders purchased the same goods from Y LTd. of Mysore for which, it has paid
CGST Rs.24,000 and SGST Rs.24,000.
d) It has exported goods worth Rs.3,00,000 which were purchased from A Ltd. and
paid CGST and SGST Rs.13,500 each.
e) It has also made intra-state supply of goods worth Rs.2,00,000 which are
exempted under GST. For these good ITC attributable is Rs.18,000 (IGST)
f) Other information.
a. ITC attributable in respect of outward supply of services made to Raghu
Rs.13,500 IGST
b. Factory rent paid Rs.60,000 GST charged by landlord CGST Rs.5400 and
SGST Rs.5,400
c. Telephone expenses paid Rs.5,000 GST levied as CGST Rs.450 and SGST
Rs.450.
Calculation of Input Tax Credit Available `
Particulars IGST CGST SGST
Goods purchased from X Ltd. -- 48,000 48,000
Goods purchased from Y LTd. -- 24,000 24,000
Goods purchased from A LTd. -- 13,500 13,500
Tax attributable from exempted goods -- -- --
Tax Attributable in respect of supply to Raghu 13,500 -- --
Tax paid on Factory Rent -- 5,400 5,400
Tax paid on Telephone Bill -- 450 450
Total ITC Available 13,500 91,350 91,350
Calculation of Output Tax Liability and GST Payable
Particulars IGST CGST SGST
Intra State Supply of goods (Rs.10,00,000 x -- 90,000 90,000
18/100 x 1/2)
Inter State Supply of Services to Raghu 18,000 -- --
(Rs.1,00,000 x 18/100)
Outward Supply to SEZ -- -- --
Export of Goods -- -- --
Supply of exempted goods -- -- --
Output Tax Liability 18,000 90,000 90,000
Less: ITC Available 13,500 91,350 91,350
4,500 (1,350) (1,350)
Less: CGST Against IGST 1,350 1,350 --
3,150 Nil (1,350)
Less; SGST Against IGST 1,350 -- 1,350
GST Payable 1,800 Nil Nil

Department of Commerce, KLE Society’s, Lingaraj College, Belagavi (Autonomous) 29