Value of Supply Under GST – Advanced Tax Laws and Practice Important Questions
Question 1.
Jitendra Ltd., of Delhi, a registered supplier, is manufacturing taxable goods. It provides the following details of taxable supply made by it for the month of March, 20XX:
(a) List Price of Goods supplied (exclusive of taxes and discount): ₹12,00,000
(b) Subsidy received from Central Government for supply of taxable goods to Government School, directly linked to the price: ₹1,10,000
(c) CGST & SGST chargeable on the goods: ₹50,000
(d) Tax levied by municipal authority: ₹25,000
(e) Secondary packing charged: ₹10,000
Notes:
(a) Jitendra Ltd. offers 2% discount on the list price of goods which is recorded in the invoice for the goods.
(b) The list price of goods is after considering the subsidy received from Central Government. However, the other charges/taxes/fees are charged to the customer over and above the list price.
Answer:
Calculate the value of taxable supply made by Jitendra Ltd. for the month of March, 20XX.
|
Particulars |
Amount (₹) |
| List Price of goods |
12,00,000 |
| Less: Discount @ 2% of ₹12,00,000 (Since discount is known at the time of supply, it is deductible from the value as per section 15(3) (a) of CGST Act, 2017) |
(24,000) |
| Subsidy of ₹1,10,000 received from Central Government (not includible in value as per section 15(2)(d) of CGST Act, 2017) |
Nil |
|
CGST and SGST of ₹50,000 chargeable on goods (not includible in the value as per section 15(2)(1) of CGST Act, 2017) |
Nil |
| Tax levied by Municipal Authority (includible in the value as per section 15 of CGST, 2017) |
25,000 |
| Secondary packing charged (being incidental expenses, the same are includible in the value as per section 15(2)(c) of the CGST Act, 2017) |
10,000 |
| VALUE OF TAXABLE SUPPLY |
12,11,000 |
Question 2.
From the following details pertaining to Ashwathama, a registered dealer engaged in purchase & sale of goods, ascertain GST liability (CGST/ SGST/IGST) for the month of November, 20XX:
(a) Sale Price charged to customers within state (excluding GST): ₹12,50,000
(b) Commission charged to buyers ₹12,000
(c) Packing and Forwarding expenses incidental to sale: ₹18,000
(d) Weighment charges shown separately in invoices: ₹9,500 Prompt payment discount, indicated in invoice 1%, if payment made within 1 month. All buyers of goods have availed discount.
The rates of taxes for the goods supplied are as under:
CGST: 9%
SGST: 9%
IGST: 18%
Answer:
Determination of GST liability of Ashwathama for the month of November, 20XX
| Particulars |
Amount (₹) |
| Sale Price charged to the customers within state (excluding GST) |
12,50,000 |
|
Add: Commission charged to buyers (Note 1) |
12,000 |
| Packing and forwarding expenses incidental to sale (Note 1) |
18,000 |
| Weighment charges shown separately invoice (Note 1) |
9,500 |
|
12,89,500 |
|
| Less: Prompt payment discount, indicated in the invoice 1% (Note 2) |
(12,500) |
| Therefore, Value of Taxable Supply |
12,77,000 |
| SGST @ 9% |
1,14,930 |
| CGST @ 9% |
1,14,930 |
| Total GST Payable (CGST + SGST) |
2,29,860 |
Notes:
1. As per section 15(2)(c) of CGST Act, 2017, all incidental expenses like commission, packing and forwarding, weighment charges will form part of the taxable supply.
2. Prompt payment discount is deductible as it is known at the time of supply. [Section 15(3)(a) of the CGST Act, 2017]
Question 3.
M/s Basu & Co., an audit firm based in Kolkata undertake an audit assignment of a Mumbai-based client. The contract with the client includes ₹5,00,000 as audit fee and arrangement of taxi for movement of auditors amounting to ₹15,000 actually spent by the auditors and reimbursed by the client. Find out the transaction value in the hands of M/s Basu and Company.
Answer:
As per section 15(2)(b) of the CGST Act, 2017, the value of supply shall include any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. Therefore, Transaction Value in this case shall be ₹5,15,000 [₹5,00,000 + ₹15,000], It is assumed that the fee is exclusive of GST/Amount of GST is to be recovered separately.
Question 4.
Mr. Abinash has received net amount of ₹3,24,000 (after TDS) from Voygers Ltd. on 5th February, 2019 for taxable service rendered in January, 2019. The net payment is after TDS under section 194J of Income-tax Act, 1961 @ 10%. You are required to answer the following:
(a) Find the Value of taxable services (i.e. the value on which GST is charged)
(b) Compute the amount of TDS as per section 194J
(c) Find out CGST and SGST (GST is 18%)
Answer:
Computation of Value of Taxable Supply:
|
Particulars |
Amount (₹) |
| Let Value of taxable supply be |
100 |
| Add: GST @ 18% of above |
18 |
| Total Invoice Value |
118 |
| Less: TDS @ 10% on 100 |
(10) |
| Net amount paid by the client/Recipient of supply |
108 |
| Net amount received by Abinash |
3,24,000 |
| A. Therefore, Value of Taxable Supply (₹3,24,000 × 100/108) |
3,00,000 |
| B. Therefore, TDS @ 1096 |
30,000 |
| C. GST payable : CGST @ 996 |
27,000 |
| D. SGST @ 996 |
54,000 |
Note: CBDT vide Circular No. 23/2017, dated 19th July, 2017 has clarified that wherever in terms of the agreement or contract between the payer and the payee, if “GST on Services” component has been indicated separately in the invoice, then no tax would be deducted at source under Chapter XVIIB of Income-tax Act, 1961 on such GST component and GST for these purposes will include CGST, SGST, IGST and UTGST.
Question 5.
Venus Bakery Products Ltd. is doing business of manufacturing and selling of different types of Cakes, Pastries, Biscuits, Cookies and other bakery products through a network of dealers. The bakery sells the goods to the dealers on the price less discount at a standard rate and pays GST accordingly. It offers additional discount on the stocks when goods remain unsold with the dealers as an incentive to push the sales. Can the additional discount so given on unsold stocks be reduced from the price at which the goods were sold and consequential tax adjustments be made?
Answer:
Facts of the case:
In the given case Venus Bakery Products sold the goods after discount to the dealers. Later on supplier has given additional discount as an incentive to push sales of unsold stocks left with the dealers.
Issue:
Whether additional discount given by the supplier as an incentive after supply of goods is deductible from the transaction value.
Legal provisions:
As per section 15(3) any discount is deductible after supply, if following conditions are satisfied:
- Such discount is established in terms of agreement entered into at or before the time of supply.
- Such discounts are linked to the relevant invoices.
- ITC proportionate to such discount is reversed by the recipient.
Conclusion:
In the given case, Venus Bakery Products has given additional discount after supply of goods which was not agreed at the time of supply, Hence, deduction of such additional discount is not available.
Question 6.
M/s Jonty India Ltd. a manufacturer of heavy machines registered at Jaipur (Rajasthan) supplied one machine to M/s Dhanuka Ltd. of Udaipur, Rajasthan on 5th Feb 20XX under an invoice of the same date. Using the information given below, compute the value of machine and GST payable in cash for the month of February, 20XX by M/s Jonty India Ltd. with appropriate working notes. Assume rate of CGST, SGST & IGST on the machine to be 9%, 9% & 18% respectively.
|
Particulars |
Amount (₹) |
| 1. Basic price of machine exclusive of taxes and discount |
28,50,000 |
| 2. Trade discount is allowed at 3% on basic price and is shown in the invoice |
85,500 |
| 3. Secondary packing charges for safe transportation of machine on the request of buyer |
30,000 |
| 4. Design and Engineering charges of the machine |
90,000 |
| 5. Tax levied by municipal authority on sale of the machine |
25,000 |
| 6. Subsidy received by supplier from the State Government to encourage manufacture of machine |
80,000 |
| 7. Pre-delivery inspection charges paid to an independent agency in terms of the agreement for supply. The amount was paid by M/s Dhanuka Ltd. |
22,000 |
| 8. Interest amount paid by M/s Dhanuka Ltd. for delay in payment of machine |
12,000 |
| Inward Supplies | |
| 9. IGST paid on food items for consumption by employees working in the factory |
8,000 |
| 10. SGST & CGST (₹15,000 each) paid on electrical transformer used in the manufacturing process. |
30,000 |
Note:
1. M/s Jonty India Ltd. has no input tax credit balance at the beginning of February, 20XX. All the other conditions necessary for availing the eligible input tax credit have been fulfilled.
2. There are no other transactions of supplies during the month of February, 20XX.
3. M/s Jonty India Ltd. and M/s Dhanuka Ltd. are not related persons.
Answer:
Computation of Value of Machine sold by M/s Jonty India Ltd.
|
Particulars |
Amount (₹) |
| Basic Price of Machine | 28,50,000 |
| Add: | |
| Secondary Packing | 30,000 |
| Design and Engineering charges | 90,000 |
| Taxes levied by Municipal authority | 25,000 |
| Pre-delivery inspection charges paid by M/s Dhanuka Ltd. | 22,000 |
|
Particulars |
Amount (₹) |
| Interest for delay in payment (₹12,000 × 100/118) |
10,169 |
| Less: 3% Trade Discount on basic price of machinery = ₹28,50,000 |
(85,500) |
| Taxable Value of supply |
29,41,669 |
Computation of net GST payable (in cash) by M/s Jonty India Ltd. for the month of Febrauary, 20XX
|
Particulars |
CGST Amount (₹) |
SGST Amount (₹) |
| Tax on value of ₹29,41,669 |
2,64,750 |
2,64,750 |
| Less: Input Tax Credit (ITC) on tax paid on electrical transformer used in the manufacturing process |
(15,000) |
(15,000) |
| Net GST Payable |
2,49,750 |
2,49,750 |
Notes:
(1) As per section 15(2) of the CGST Act, 2017:
(i) All incidental expenses including packing charged by the supplier to the recipient of supply are includible in the value of supply.
(ii) Any amount charged for anything done by the supplier in respect of the supply of goods at the time of, or before delivery of goods is includible in the value of supply.
(iii) Any taxes levied under any law for time being in force other than CGST/SGST/UTGST/IGST, if charged separately by the supplier are includible in the value of supply.
(iv) Any amount that the supplier is liable to pay in relation to such supply, but which has been included by the recipient of the supply and not included in the price actually paid or payable for the goods and/or services is includible in the value of supply.
(v) Interest for the delayed payment of any consideration for the supply is includible in the value of supply. Further, it is assumed that such interest is inclusive of tax and that the same has been received by M/s Jonty India Ltd. in month of February itself. Therefore, the time of supply of such interest will be in February, 20XX and same will be considered while paying the tax liability of that month.
(vi) Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments are includible in the value of supply. Since in the given case, subsidy is received from State Government, the same has not been included in the value of supply presuming it to be directly linked to the price.
(2) Trade discount has been shown in the invoice and hence, the same is excluded from the value of supply in terms of section 15(3) of the CGST Act, 2017.
(3) ITC on food or beverages is specifically disallowed unless the same is used for making outward taxable supply of the same category or as an element of the taxable composite or mixed supply {Section 17(5) of CGST Act}. Further, since transformers are used in the course or furtherance of business, ITC thereon is available in terms of section 16(1) of CGST Act, 2017.
Note:
In the above answer, it has been assumed that the basic price of the machine has been arrived at after adjusting the subsidy and that the basic price is the price charged from the customer. Consequently, subsidy received from State Government has not been reduced from the basic price of the machine while arriving at the taxable value of the supply. However, it is also possible to assume that the subsidy has yet not been adjusted in the basic price and that the price which will be charged from the customer is ₹27,70,000 (₹28,50,000 – ₹80,000) ie. after excluding subsidy. In that case, value of supply will be ₹28,61,669.
Question 7.
Saraswathi Polymers Pvt. Ltd., has two units, one in Coimbatore, Tamil Nadu and another in Thrissur, Kerala. In Coimbatore unit, it manu-factures customised products only. Each lot consists of 100 units and is valued at ₹5,00,000. These products require further processing before delivery to the customers. The further processing is done by Kerala unit, which enjoys a unique market position as there being no competitor providing similar services in Kerala. The Kerala Unit, besides processing the products of the Tamil Nadu Unit, undertakes processing work of outsiders also and collects charges from them. Other manufacturers in Kerala, who deliver products to this unit for further processing, value at 13.5 lakhs per 100 units. You are required to determine the value of 100 units supplied by Tamil Nadu Unit of the registered supplier to its Kerala unit as per provisions of the CGST Act, 2017.
Answer:
As per section 25(4) of the CGST Act, 2017, a person who has obtained or is required to obtain more than one registration, whether in one State or Union Territory or more than one State or Union Territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Therefore, units of Saraswathi Polymers Pvt. Ltd. in Kerala and in Coimbatore, Tamil Nadu are two distinct person.
As per Rule 28 of CGST Rules, 2017, the value of supply of goods between distinct persons as specified in sub-sections (4) and (5) of section 25 of the CGST Act, 2017 or where the supplier and recipient are related, other than where supply is made through an agent, shall,
(a) be the open market value of such supply,
(b) if the open market value is not available, be the value of supply of goods or services of like kind and quality,
(c) if the value is not determinable under clause (a) or (b), then the cost of supply plus 10% mark up or to be determined by other reasonable means, in that sequence (Rule 30 & Rule 31 of the CGST Rules, 2017):
Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of supplier, be an amount equivalent to the 90% 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.
In the given case, open market value of the 100 units being supplied to Kerala unit is not available since the supplier manufactures customised products. Therefore the value of 100 units supplied by Tamil Nadu Unit of Saraswathi Polymers Pvt. Ltd. to Kerala Unit will be value of similar kind and quality supplied to Kerala Unit by other customers which is being ₹3.5 lakhs per 100 units.
Since goods are not supplied as such by the Kerala Unit, goods cannot be valued at 90% of the price charged for the supply of like goods by the Tamil Nadu Unit to its unrelated customers as per the first proviso to Rule 28 of CGST Rules, 2017. Hence, value be taken at ₹3.5 lakhs for the 100 units supplied by Tamil Nadu Unit to its Kerala Unit for the purpose of processing.
Question 8.
Prada Forex Private Limited, registered in Delhi, is a money changer. It has undertaken the following purchases and sales of foreign currency:
(a) 1,000 US$ are purchased from Nandi Enterprises at the rate of ₹68 per US$. RBI reference rate for US$ on that day is ₹68.60.
(b) 2,000 US$ are sold to Menavati at the rate of ₹67.50 per US$. RBI reference rate for US$ on that day is not available.
Determine the value of supply in each of the above cases in terms of
A. Rule 32(2)(a) of CGST Rules, 2017
B. Rule 32(2)(b) of CGST Rules, 2017
Answer:
Rule 32(2) of the CGST Rules, 2017 prescribes the provisions for determining the value of supply of services in relation to the purchase or sale of foreign currency, including money changing.
A. Determination of value under Rule 32(2)(a) of the CGST Rules, 2017:
a. Rule 32(2)(a) of the CGST Rules, 2017 provides that the value of supply of services for a currency, when exchanged from, or to, Indian Rupees shall be equal to the difference in the buying rate or selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency. Thus, value of supply is:
(RBI reference for US$ – buying rate of US$) × Total number of units of US$ bought
= (68.60 – 60.00) × 1,000
= ₹600
b. First proviso to Rule 32(2)(a) of the CGST Rules, 2017 lays down that when the RBI reference rate for a currency is not available, the value shall be 1% of gross amount of the Indian ₹provided or received by the person changing the money. Thus, the value of supply is:
= 1% of the gross amount of Indian ₹received
= 196 of (₹67.5 × 2,000)
= ₹1,350
B. Determination of value under Rule 32(2)(b) of the CGST Rules, 2017:
Rule 32(2)(b) provides that value in relation to the supply of foreign currency including money changing shall be deemed to be –
|
Currently Exchanged |
Value of Supply |
| Upto ₹1,00,000 | 1% of the gross amount of currency exchanged or; ₹250, whichever is higher |
| Exceeding ₹1,00,000 and upto ₹10,00,000 | ₹1,000 + 0.5% of the (gross amount of currency exchanged less ₹1,00,000) |
| Exceeding ₹10,00,000 | ₹5,500 + 0.1% of the (gross amount of currency exchanged less? 10,000,000); or; ₹60,000, whichever is lower |
The value of supply in the given cases would be computed as under:
(i) Gross Amount of currency exchanged = ₹68 × 1,000 = ₹68,000. Since the gross amount of the currency exchanged is less than ₹1,00,000, value of supply is 1% of the gross amount of currency exchanged (1% of ₹68,000) or ₹250, whichever is higher = ₹680.
(ii) Gross amount of currency exchanged = ₹67.5 × 2,000 = ₹1,35,000. Since the gross amount of currency exchanged exceeds ₹1,00,000 but does not exceed ₹10,00,000, value of supply is ₹1,000 + 0.5% of (₹1,35,000-₹1,00,000)
= ₹1,175.
Question 9.
There are separate valuation provisions for goods and services under the CGST, SGST and IGST provisions. Examine the correctness of this statement.
Answer:
Section 15 of CGST Act, 2017 determines the value of supply of goods or services or both. Further, provisions of section 15 as applicable for determining value of taxable supply under CGST Act has been made applicable to IGST Act as well vide section 20 of IGST Act, 2017.
Section 20 of IGST Act inter alia provides that the provisions of CGST Act relating to time and value of supply shall mutatis mutandis apply in relation I to integrated tax as they apply in relation to Central Tax. Thus, section 15 is common for all taxes and common for goods and services, Hence, it is concluded that the given statement is not correct.
Question 10.
Discuss the following transactions in context of GST law:
(a) When would a discount be excluded from the value of supply? Will secondary discount issued for goods supplied be reduced in deter-mining the value of supply?
(b) Determination of value of supply when TCS under Income-tax Act, 1961 is charged separately in the invoice.
Answer:
Determination of the value of supply:
(a) The value of supply shall not include any discount which is given before or at the time of supply if such discount has been duly recorded in the invoice issued in respect of such supply {Section 15(3)(a) of CGST Act, 2017}.
The value of supply shall also not include any discount issued after the supply is such discount is established in terms of an agreement entered into at or before the time of supply and specifically linked to relevant invoice and input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of supply {Section 15(3)(b) of CGST Act}.
As such, GST law does not distinguish between secondary discount and primary discount. In the present case, if the secondary discount is issued after the supply is completed and does not fulfil the conditions laid down under section 15(3)(b), it shall not be excluded while determining value of supply. In other words, the value of supply shall I not include any discount by way of issuance of credit notes except where it is covered by section 15(3)(b) of CGST Act.
(b) Vide CBIC corrigendum F.No. 20/ 16/04/2018-GST, dated 7th March, 2019, this aspect has been clarified as under:
Section 15(2) of the CGST Act says that the value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for time being in force other than CGST, SGST and UTGST, if charged separately by the supplier.
For the purpose of determination of value under GST, tax collection at source under the provisions of Income Tax Act is deductible as it is an interim relief not having the character of tax.
Hence, TCS charged under Income Tax Act is not includible in the determination of the value of supply.
Value Of Supply Under Gst Notes
- Valuation is covered in section 15 of CGST Act, 2017
- Section 15(1) of CGST Act, 2017 – Assessable Value = Transaction Value i.e. Price actually paid or payable for the supply of goods or services or both where supplier and recipient of supply are not related and the price is the sole consideration of supply.
- Section 15(2) of CGST Act, 2017 – following are inclusions while computing transaction value:
1. Any Taxes other than GST.
2. Any expenses incurred by the recipient of supply but paid by the supplier.
3. Any expenses incidental to supply like packing, commission, etc. z
4. Any interest, penalties, late fees paid by the recipient of supply for the delay in payment.
5. Any SUBSIDY directly linked to the price of goods/services OTHER THAN Central Government & State Government subsidy.
- Section 15(3) of CGST Act, 2017, following are exclusions while computing transaction value:
1. DISCOUNTS – Given before or at the time of supply which is recorded in the invoice (E.g.: Trade Discounts)
2. DISCOUNTS – Given after supply, on the satisfaction of following j conditions:-
a. Terms of discount should exist before or at the time of supply-
b. The discount should be relatable to the invoice.
c. Amount of Input Tax Credit as is attributable to the discount is reversed by Recipient of Supply.
Section 15(4) of CGST Act, 2017, where Assessable Value cannot be taken as Transaction Value, Valuation is as per CGST Rules (Rules 27 to 35):-
| Rule | Particulars |
| 27 | Value of supply of goods or services where the consideration is not wholly in money |
| 28 | Value of supply of goods or services or both between distinct or related persons, other than through an agent |
| 29 | Value of supply of goods made or received through an agent |
| 30 | Value of supply of goods or services or both based on cost |
| 31 | Residual method for determination of value of supply of goods or services or both |
| 31A | Value of supply in case of lottery, betting, gambling and horse racing |
| 32 | Determination of value in respect of certain supplies |
| (1) | Provisions of this rule shall have overriding effect over other provisions of valuation. Further it is OPTIONAL for suppliers to apply these provisions |
| (2) | Valuation in case of foreign exchange services {Clauses (a) & (b)} |
| (3) | Valuation in case of booking by an AIR TRAVEL AGENT |
| (4) | Valuation in case of LIFE INSURANCE business |
| (5) | Valuation in case of SECOND HAND GOODS |
| (6) | Valuation of Token, VOUCHER, Coupon or Stamp |
| (7) | Valuation of taxable services provided by class of service providers notified by Government. |
| 33 | Value of supply of services in case of PURE AGENT |
| 34 | Rate of Exchange of currency, other than Indian rupees, for determination of value |
| 35 | Value of supply inclusive of IGST, CGST, SGST & UTGST |
- Section 15(5) of the CGST Act, 2017, in case of Government notified goods, the value shall be as. prescribed.