15.2.1 Value includes taxes, duties etc other than GST & GST Compensation Cess

Question-1 [ICSI-E-D20-76-1] [Invoice value inclusive of GST]

Baba Automobiles had supplied the goods to Gogia Automobiles in the month of March, 2020 of the invoice value of Rs.4,72,000. The supply so made was inclusive of tax charged as CGST and SGST which on the products so sold as per rates prescribed under CGST Act, 2017 is of 18%. The value of supply as per rule 35 of the CGST Rules, 2017 of such supply shall be -

(A) Rs.4,00,000; (B) Rs.4,72,000; (C) Rs.3,87,040; (D) Rs.4,84,960

Ans

Taxable value = 4,72,000/1.18 = Rs.4,00,000

Question-1A [ICSI-E-D19-69-1]

Babbur Automobiles of Jaipur has supplied the goods of Rs.2,66,090 to Goel Automobiles of Ajmer in the month of March, 2019. The supply so made was inclusive of tax charged as CGST and SGST which on the products so sold as per rates prescribed under CGST Act, 2017 is @ 18% The value of supply asper Rule 35 of the CGST Rule, 2017 of such supply shall be ..............

(A) Rs.2,66,090; (B) Rs.2,25,000; (C) Rs.3,13,986; (D) Rs.2,25,500

Answer

Taxable value = 2,66,090/1.18 = Rs.2,25,000

Question-2 [ICMAI-F-J18-5b-4] [Other taxes]

Admission to True Theater is Rs. 90 per ticket for a Tamil Movie as well as for a Hindi Movie plus entertainment tax 10% on Tamil Movies and 20% on other languages. In the month of November, True Theater sold 2000 tickets of Tamil Movies and 1500 tickets of Hindi Movies. Find the value of taxable supply of service. Applicable rate of GST 18% & 28% respectively. Find the GST liability if any?

Answer

Question-3 [ICSI-E-J22-79-1]

Assessable Value (A. V.) = Rs.6 lakh

(i) BCD – 10%

(ii) IGST – 12%

(iii) Social Welfare Surcharge @ 10%

Calculate the total amount of duties and taxes :

(A) Rs.1,38,000 (B) Rs.1,45,920 (C) Rs.1,45,200 (D) Rs.1,53,120

15.2.1.1 TCS under Income-Tax Act is not includible in the taxable value

Question-1 [ICSI-P-D19-2A(i)(b)-2.5] [ICAI-F-Ch7-1]

Income tax collected at source should be included in value of the supply in terms of section 15(2)(a). Examine the correctness of the statement.

Answer

The statement is not correct. CBIC vide Circular No. 76/50/2018 GST dated 31.12.2018 (amended vide corrigendum dated 7.03.2019) has clarified that for the purpose of determination of value of supply under GST, tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.

15.2.2 Value includes any amount that the supplier is liable to pay but which has been incurred by recipient

Question-1 [ICSI-P-D18-5a(iii)-2] [Exp incurred by recipient]

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 Rs.5,00,000 as audit fee and arrangement of taxi for movement of auditors amounting to Rs.15,000 actually spent by the auditors and reimbursed by the client. Find out the transaction value in the hands of M/s Basu & Co

Answer

As per section 15(2)(b) 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.

Therefore, transaction value in the hands of M/s Basu & Co. is Rs.5,15,000.

Question-2 [ICSI-E-D21-84-1] [Exp that supplier not liable to pay]

JC & Co., Chartered Accountants operating at Mumbai provided services to a client and issued the bill as under:

(i) Professional Fees Rs.1,00,000

(ii) Out of pocket Expenses Rs.10,000

(iii) MCA fees for e-filing of documents Rs.5,000

The value of service for the purpose of paying tax under GST would be taken as

(A) Rs.1,15,000; (B) Rs.1,10,000; (C) Rs.1,05,000; (D) Rs.1,00,000

15.2.2.1 Clarifications on supply of moulds and dies on FOC basis by OEM to CM

Question-1 [ICAI-F-Ch7-2]

How should the supply made by a component manufacturer be valued, when he uses moulds and dies owned by the original equipment manufacturer sent free of cost to him? Explain

Answer

Circular No. 47/21/2018 GST dated 08.06.2018 has clarified that while calculating the value of the supply made by the component manufacturer using moulds and dies owned by Original Equipment Manufacturers (OEM)  sent free of cost (FOC) to him, the value of such moulds and dies shall not be added to the value of supply made by him because the cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b).

However, if the contract between OEM and component manufacturer was for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be added to the value of the components.

15.2.3 Value includes incidental, commissioning, packing or other expenses

Question-1 [ICAI-I-Ch5-4] [Other exp]

Furniture Wala is a chain of retail showrooms selling both modern and classic furniture. In order to build strong customer association, the showroom provides free delivery of the furniture at the premises of the customers if the distance between the showroom and the customer’s premises is upto 20 kms. Where the distance is more than 20 kms, the showroom charges a concessional freight of Rs.10 for every additional km.

Ms. Leena Kapoor purchases a double bed, a dressing table and a centre table for Rs.2,00,000 from Furniture Wala. Ms. Leena gets free delivery of the furniture as her residence is located at a distance of 18 km from the showroom. The showroom incurs an expenditure of Rs.1000 for delivering the furniture at Ms. Leena’s residence.

Determine the value of taxable supply made by Furniture Wala. Will your answer change if residence of Ms. Leena is 50 km away from the showroom?

Answer

(1) Statutory Provision

Section 15(1) - The value of a supply shall be the transaction value, which is actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.

(2) Facts and Opinion

In the given case, the showroom is not charging any amount towards freight from Ms. Leena but incurring the same out of its own pocket. Both parties are not related.

Actual price paid by Ms. Leena is Rs.2,00,000

Hence value of supply = Rs.2,00,000

However, the answer will change in the second case when the showroom will charge Rs.300 for freight [(50km – 20 km) x Rs.10] from Ms. Leena.

In this case, the supply will be a composite supply (principle supply being the supply of furniture) and value thereof will be Rs.2,00,300.

Question-2 [ICAI-F-N19-3b-4]

Surya Agencies has agreed to supply goods to customer’s premises. Goods valued Rs.80,000 are taxable at 5% IGST as it is an Inter-state supply. It also pays freight and transit insurance of Rs.12,000. GTA is a registered entity and has charged GST (6% CGST and 6% SGST) under forward charge.

(i) Compute the Invoice value of supply including IGST.

(ii) What will be the Invoice value of supply including IGST, if the supply was under ex-factory basis instead of door-delivery basis.

Answer

Note: Section 15(2)(c) – Value of supply includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

Hence, freight and transit insurance of Rs.12,000 shall be included in taxable value

Question-3 [ICAI-I-Ch5-5] [Other exp on request of recipient]

AKJ Foods Pvt. Ltd. gets an order for supply of processed food from a customer. The customer wants the consignment tested for gluten and specified chemical residues. AKJ Foods Pvt. Ltd. does the testing before the supply and charges a testing fee for the same from the customer. AKJ Foods Pvt. Ltd. argues that such testing fees should not form part of the consideration for the sale as it is a separate activity. Is the company’s argument correct in the light of section 15?

Answer

(1) Statutory Provision

Section 15(2)(c) – Value of supply includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

(2) Facts & Opinion

Since AKJ Foods Pvt. Ltd. does the testing before the delivery of goods, the charges therefor will be included in the value of the consignment.

Therefore, AKJ Foods Pvt. Ltd.’s argument is not correct. The testing fee should be added to the price to arrive at value of the consignment.

Question-4 [ICAI-F-Ch7-8] [Other taxes not charged from recipient, Other Charges]

Dushyant rents out a commercial building owned by him to Bharat for the month of December, for which he charges a rent of Rs.19,50,000. Dushyant pays the maintenance charges of Rs.1,00,000 (for the December month) as charged by the local society. These charges have been reimbursed to him by Bharat.

Also, Dushyant has paid municipal tax of Rs.2,85,000 which he has not charged from Bharat.

You are required to determine the value of supply and the GST liability of Dushyant for the month of December assuming CGST and SGST rates to be 9% each.

Note: All the amounts given above are exclusive of GST.

Answer

Computation of the value of supply and the GST liability of Dushyant for the month of December

Note

(1)

Section 15(1) - The value of a supply shall be the transaction value, which is actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.

Section 15(2)(c) – Value includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

Since such charges are reimbursed by the tenant (Bharat), such charges ultimately form part of the rent paid by Bharat to Dushyant and thus, form part of the value as per section 15(2)(c)

(2) Since municipal tax is paid by the supplier (Dushyant) and not charged to the recipient, the same is not includible in the value in terms of section 15(1).

Question-5 [ICAI-F-M18-O-3b-4] [Other taxes, Other charges, GST on refundable adv]

Determine the value of supply and the GST liability, to be collected and paid by the owner, with the following particulars:

GST rates applicable on renting of business premises is as follows: CGST 9%; SGST 9%

Provide suitable explanations where required

Answer

Note: Rent and maintenance charges are assumed to be exclusive of GST.

Note

(1)

Section 15(1) - The value of a supply shall be the transaction value, which is actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.

Section 15(2)(c) – Value includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

(2) Since municipal tax is paid by the supplier (Dushyant) and not charged to the recipient, the same is not includible in the value in terms of section 15(1).

15.2.4 Value includes interest, late fee or penalty for delayed payment on receipts basis

Question-1 [ICSI-E-D22-66-1]

As per Section 15(2) of CGST Act, 2017, Interest on late fees or penalty for delayed payment of any consideration for any supply ................. .

(A) Shall be included if amount exceeds Rs.50,000

(B) Shall be included in the value of taxable supply only if the same is recovered from the recipient by the supplier

(C) Shall always be excluded from the value of taxable supply since it is consideration for delay in payment and not a consideration for supply of goods/ services

(D) Shall always be included in the value of taxable supply

Question-2 [ICAI-I-Ch5-7] [Waiver of Interest]

Mezda Banners, an advertising firm, gives its customers an interest-free credit period of 30 days for payment. Its customer ABC paid for the supply 32 days after the supply of service. Mezda Banners waived the interest payable for delay of two days.

The Department wants to add interest for two days to the value of supply. Should notional interest be added to the value?

Answer

(1) Statutory Provision

Section 15(1) - The value of a supply shall be the transaction value, which is actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.

Section 15(2)(d) – Value of supply includes interest or late fee or penalty for delayed payment of any consideration for any supply;

(2) Facts & Opinion

Since value of supply is the actual price paid or payable, hence once waived, the interest is not payable and is therefore, not to be added to the value.

Question-3 [ICSI-E-D19-O-91-1] [Other Charges, Intt on delayed payment]

WY (P) Ltd. sold goods to PR & Co. The list price was Rs.1,40,000 for the goods besides (i) packing charges Rs.6,000; (ii) interest for delayed payment Rs.8,000; (iii) transport charges Rs.12,000 through own vehicle of WY (P) Ltd. The value of supply is:

(A) Rs.1,66,000; (B) Rs.1,54,000; (C) Rs.1,46,000; (D) Rs.1,40,000

Answer

Note

(1) Section 15(2)(c) - Value of supply includes any amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

(2) Section 15(2)(d) – Value of supply includes interest or late fee or penalty for delayed payment of any consideration for any supply.

Question-4 [ICAI-I-Ch5-Ill-2] [Charges incurred by recipient, Intt on delayed payment]

Samriddhi Advertisers conceptualised and designed the advertising campaign for a new product launched by New Moon Pvt Ltd. for a consideration of Rs.5,00,000. Samriddhi Advertisers owed Rs.20,000 to one of its vendors in relation to the advertising service provided by it to New Moon Pvt Ltd. Such liability of Samriddhi Advertisers was discharged by New Moon Pvt Ltd. New Moon Pvt Ltd. delayed the payment of consideration and thus, paid Rs.15,000 as interest. Assume the rate of GST to be 18%

Determine the value of taxable supply made by Samriddhi Advertisers.

Answer

Note

(1) Section 15(2)b) – Value of supply includes any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient and not included in the price;

(2) Section 15(2)(d) – Value of supply includes interest or late fee or penalty for delayed payment of any consideration for any supply;

15.2.5 Value includes subsidies directly linked with price excluding subsidies provided by the Government

Question-1 [ICSI-E-D18-O-84-1] [Subsidy from Govt]

Subsidy given by the Central Government or a State Government while determining value of taxable supply under Goods and Service Tax (GST) as per section 15 of the CGST Act, 2017:

(A) included in the transaction value i.e. (value of taxable supply)

(B) just ignored no treatment

(C) shall not be included in transaction value i.e. (value of taxable supply)

(D) deducted from the transaction value i.e. (value of taxable supply)

Quesiton-2 [ICAI-I-Ch5-3] [Subsidy received from others not directly linked to price]

Sharp Minds Institute provides coaching for engineering entrance examinations. Monthly fee charged by the Institute from a student is Rs.10,000. The Institute is known for its commitment to provide education to underprivileged children. It trains 10 students every year for entrance examinations free of cost.

The Institute has received Rs.3,00,000 as coaching fees during a month. Nav Jeevan, an NGO working in the area of education for underprivileged children, has given a subsidy of Rs.10,000 (in lumpsum) during the month to the Institute as it is serving the cause of underprivileged children.

Determine the value of supply of education services made by Sharp Minds Institute during the month.

Answer

(1) Statutory Provision

Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments

(1) Facts & Opinion

In the given case, though the subsidy is given by a non-Government body, the same is not includible in the value as it is given in lumpsum and not directly linked to the price of the supply being valued. Therefore, the value of supply made by Sharp Minds during the month is Rs.3,00,000.

Question-3 [ICAI-I-Ch5-6] [Subsidy received from others directly linked to price]

A philanthropic association makes a substantial donation each year to a reputed private management institution to subsidize the education of low-income group students who have gained admission there. The fee for these individuals is reduced thereby coming to Rs.3 lakh a year compared to Rs.5 lakh a year for other students. What would be the value of the service of coaching and instruction provided by the institution to the low-income group students?

Answer

(1) Statutory Provision

Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments

In this case, the subsidy is not received from the Government but from a philanthropic association. Therefore, the subsidy is to be added back to the price to arrive at the value, which comes to Rs.5 lakh a year.

Question-4 [ICMAI-I-D19-3b(ii)-5]

R, a trader dealing in Solar Cooker charged Rs.40,000 for supply of cooker to G. He has received following subsidies:

Answer

Answer

Note

(1) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

Subsidy received from government are not includible but subsidy received from NGO is includible as it is directly linked to the price.

Question-5 [ICAI-I-Ch5-9] [Other Taxes, Other exp, Late Fees, Subsidy]

Red Pepper Ltd., Delhi, a registered supplier, is manufacturing taxable goods. It provides the following details of taxable inter-State supply made by it during the month of March.

The list price of the goods is net of the two subsidies received. However, the charges/taxes/fee are charged to the customers over and above the list price.

Calculate the total value of taxable supplies made by Red Pepper Ltd. during the month of March. Rate of IGST is 18%.

Answer

Note

(1) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

Subsidy received from government are not includible but subsidy received from NGO is includible as it is directly linked to the price.

(2) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(3) Section 15(2)(c) – Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(4) Section 15(2)(d) – Value includes interest or late fee or penalty for delayed payment of any consideration for any supply.

Question-5A [ICAI-I-M18-9a-5] [Other Taxes, Other exp, Late Fees, Subsidy]

Candy Blue Ltd., Mumbai, a registered supplier, is manufacturing Chocolates and Biscuits. It provides the following details of taxable inter-state supply made by it for the month of Oct, 2017.

Calculate the value of taxable supply made by M/s Candy Blue Ltd. for the month of October,2017.

Answer

Computation of value of taxable supply made by Candy Blue Ltd. for the month of October, 2017

Note: In the above solution, list price of the goods and late fee for delayed payment of invoice have been assumed to be exclusive of taxes.

Note

(1) Section 15(1) - The value of a supply shall be the transaction value, which is actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.

(2) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Govt.

Subsidy received from Govt, the same is not includible in the value in terms of section 15(2)(e).

Subsidy received from non govt. and directly linked to price, the same is includible in the value.

(3) Section 15(2)(a) - Value includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(4) Section 15(2)(c) – Value includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(5) Section 15(2)(d) – Value includes interest or late fee or penalty for delayed payment of any consideration for any supply

Question-6 [ICAI-I-Ch5-11] [Other taxes, Exp paid by recipient, Other exp, Late fees,  Subsidy]

Shri Krishna Pvt. Ltd., a registered supplier, furnishes the following information relating to goods sold by it to Shri Balram Pvt. Ltd

Answer

Note

(1) Section 15(2)(a) - Value includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) – Value includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Govt.

(4) Section 15(2)(d) – Value includes interest or late fee or penalty for delayed payment of any consideration for any supply on receipts basis.

15.3.1 Discounts given before or at the time of supply and shown in the invoice are deductible from taxable value

Question-1 [ICSI-E-D20-72-1]

Section 15 of the CGST Act read with CGST Rules states that the value of taxable supply under GST is the transaction value. Further section 15(3) of the CGST Act defines items not to be included in the transaction value. Find from the following which shall not to be included in determination of the value of taxable supply.

(A) commission

(B) discount recorded in invoice

(C) interest

(D) late fee or penalty

Answer

(B)

Question-2 [ICSI-E-J21-63-1]

Which of the following will not be included in the value of taxable supply?

(A) Packing expenses incurred before delivery of goods or supply of services

(B) Interest collected from buyer for delayed payment of any consideration for any supply

(C) Discount granted for prompt payment by the recipient of supply as per terms of contract

(D) Penalty for delayed payment of any consideration for any supply

Answer

(C)

Question-3 [ICSI-E-D19-O-92-1] [Other exp, Disc on Inv]

Saran (P) Ltd. supplied goods to Ashwini (P) Ltd. The list price of goods was Rs.3,60,000 excluding packing charges of Rs.15,000. The supplier of goods i.e. Saran (P) Ltd. allowed discount of Rs.20,000 for prompt payment made by the recipient of supply i.e. Ashwini (P) Ltd. The value of supply would be:

(A) Rs.3,40,000; (B) Rs.3,60,000; (C) Rs.3,95,000; (D) Rs.3,55,000

Answer

Note

(1) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(2) Section 15(3)(a) - 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;

Question-4 [ICSI-E-J19-6A(ii)-5] [Other exp, Disc on Inv]

UPS Ltd. of Hyderabad supplied a power generator to TK Tyres Ltd., of Tamil Nadu and charged the following amounts to the supply:

Following additional information are also furnished:

(a) Rate of GST – 18%

(b) A cash discount @ 3% on price is given to the customer at the time of supply and the same is also recorded in the invoice.

Calculate the value of supply and the GST payable.

Answer

Note

(1) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(2) Section 15(3)(a) - 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;

Question-5 [ICSI-P-J21-2A(iii)-5] [Exp paid by recipient on behalf of supplier, Other exp, Disc on inv]

From the following information determine the value of taxable supply as per the provision of section 15 of the CGST Act, 2017.

Prompt payment discount, indicated in invoice 1%, if payment made within one month. The buyer availed the discount.

Calculate the taxable value of supply of generator set under GST Law along with the reasons.

Answer

Note

(1) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(2) Section 15(2)(b) - Value of supply includes any amount that the supplier is liable to pay but which has been incurred by the recipient and not included in the price actually paid or payable for such supply.

(3) Section 15(3)(a) - 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;

Question-6 [ICSI-E-J21-65-1] [Other exp, Subsidy, Disc on Inv]

Manked & Co. Delhi made supplies of Rs.4,15,000 to Gupta & Co. of Noida (UP).

Besides, it charged Rs.10,000 towards packing charges.

Mankad & Co. received Rs.25,000 as subsidy from an NGO for such supply.

It allowed discount @ 2% which is mentioned in the invoice. What is the value of supply?

(A) Rs.4,06,700; (B) Rs.4,41,000; (C) Rs.4,16,500; (D) Rs.4,31,200

Answer

Note

(1) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(2) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Above subsidies is from non government body and is directly linked to the price.

(3) Section 15(3)(a) - 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;

Question-7 [ICAI-I-Ch5-Ill-1] [Other Taxes, Other exp, Subsidy from others, Disc on Inv]

Black and White Pvt. Ltd. has provided the following particulars relating to goods sold by it to Colourful Pvt. Ltd.

Black and White Pvt. Ltd. received Rs.2,000 as a subsidy from a NGO on sale of such goods. The price of Rs.50,000 of the goods is after considering such subsidy. Black and White Ltd. offers 2% discount on the list price of the goods which is recorded in the invoice for the goods.

Determine the value of taxable supply made by Black and White Pvt. Ltd.

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Above subsidies is from non government body and is directly linked to the price.

(4) Section 15(3)(a) - 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;

Question-8 [ICSI-E-D20-75-1] [Other Taxes, GST, Other exp, Subsidy from others, Disc on Inv]

Mishra Enterprises of Ahemdabad had made supplies of Rs.3,50,000 to Beeta Enterprises of Ahemdabad.

Municipal Authorities of Ahemdabad on such supplies levied the tax @ 10% of Rs.35,000.

CGST and SGST chargeable on the supply was of Rs.42,000.

Packing charges not included in the price of Rs.3,50,000 amounted to Rs.5,000.

Subsidy of Rs.20,000 was received from an NGO on the sale of such goods and the price charged of Rs.3,50,000 is after taking in to account the amount of subsidy so received.

Discount offered is @ 2% which was mentioned on the invoice.

The value of supply in this case shall be

(A) Rs.4,46,500; (B) Rs.4,03,000; (C) Rs.4,52,000; (D) Rs.4,01,800

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Above subsidies is from non government body and is directly linked to the price.

(4) Section 15(3)(a) - 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;

Question-8A [ICSI-E-D19-68-1]

Mishra Enterprises had made supplies of Rs.5,50,000 to Bee Kay Enterprises. Municipal Authorities of Jaipur on such supplies levied the tax @ 10% of Rs.55,000. CGST and SGST chargeable on the supply was of Rs.66,000. Packing charges not included in the price of Rs.5,50,000 amounted to Rs.15,000. Subsidy of Rs.25,000 was received from an NGO on the sale of such goods and the price of Rs.5,50,000 is after taking in to account the amount of subsidy so received. Discount offered is @ 1% which was mentioned on the invoice. The value of supply in this case shall be ...................

(A) Rs.6,45,000; (B) Rs.6,39,500; (C) Rs.6,20,000; (D) Rs.6,38,550

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Above subsidies is from non government body and is directly linked to the price.

(4) Section 15(3)(a) - 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;

Question-8B [ICSI-E-D18-5e-3]

Nisha Enterprises had made supplies of Rs.9,00,000 to D.K. Enterprises on which a tax of Rs.90,000 was levied by Municipal Authorities. The CGST and SGST chargeable on the supply @ 5% was of Rs.45,000. Packing charges of Rs.25,000 are not being included in the price of supply value of Rs.9,00,000.

Nisha Enterprises received a subsidy of Rs.60,000 from an NGO on the sale of such goods and the price mentioned above of Rs.9,00,000 is after taking into account the subsidy so received. A discount of 1% is also offered by Nisha Enterprises as being mentioned on the invoice.

Determine the value of supply as per the provision of the CGST Act, 2017.

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Above subsidies is from non government body and is directly linked to the price.

(4) Section 15(3)(a) - 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;

Question-8C [ICSI-P-D20-O-3a-5]

Hare Rama and Hare Krishna Pvt. Ltd engaged in the business of plastic goods provides the following particulars relating to the goods sold by it to Kamdhenu Enterprises during the month of January, 2020:

Hare Rama and Hare Krishna Pvt. Ltd received Rs.7,500 as a subsidy from a NGO on the sale of such goods. The list price of Rs.2,50,000 of the goods so given is after considering and deducting the amount of such subsidy. Hare Rama and Hare Krishna Pvt. Ltd offers 2% discount on the list price of the goods which is recorded in the invoice of the supplies.

Determine and work out the value of taxable supply as per provisions of GST law made by Hare Rama and Hare Krishna Pvt. Ltd. during the month of January, 2020 to Kamdhenu Enterprises.

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Above subsidies is from non government body and is directly linked to the price.

(4) Section 15(3)(a) - 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;

Question-8D [ICMAI-I-J18-3b-7]

RG Pvt. Ltd. provides the following particulars relating to goods sold by it to GK Pvt. Ltd.:

RG Pvt. Ltd. received Rs.40,000 as a subsidy from a NGO on sale of such goods. The price of ` 10,00,000 of the goods is after considering such subsidy.

RG Ltd. offers 2% discount on the list price of the goods which is recorded in the invoice for the goods.

Determine the value of the taxable supply made by RG Pvt. Ltd.

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Above subsidies is from non government body and is directly linked to the price.

(4) Section 15(3)(a) - 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;

Question-8E [ICAI-F-M18-O-1a-5] [ICAI-F-Ch7-9] [Other taxes, GST, Other exp, Subsidy, Disc on inv]

Vayu Ltd. provides you the following particulars relating to goods supplied by it to Agni Ltd.:

Vayu Ltd. offers 3% discount on the list price of the goods which is recorded in the invoice for the goods.

Determine the value of taxable supplies made by Vayu Ltd.

Answer

Note

(1) Statutory Provision

Section 15(1) - The value of a supply shall be the transaction value, which is actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.

Section 15(2)(a) - Value includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

Section 15(2)(c) – Value includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

Section 15(2)(e) - Value includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

Section 15(3)(a) - 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.

Question-9 [ICSI-P-J19-2A(i)-5] [Other Taxes, GST, Other exp, Subsidy from Govt, Disc on Inv]

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, 2019:

(i) Jitendra Ltd. offers 2% discount on the list price of the goods which is recorded in the invoice for the goods.

(ii) The list price of the goods is after considering the subsidy received from Central Government. However, the other charges/taxes/fee are charged to the customers over and above the list price.

Calculate the value of taxable supply made by Jitendra Ltd. for the month of March, 2019.

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

(4) Section 15(3)(a) - 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;

Quesiton-10 [ICAI-I-Ch5-10] [Exp paid by recipient, Other exp, Subsidy from Govt, Disc on inv]

M/s. Flow Pro, a registered supplier, sold a machine to BP Ltd. It provides the following information in this regard

Note: Price of the machine is net of the subsidy received. Determine the value of taxable supply made by M/s Flow Pro to BP Ltd.

Answer

Note

(1) Section 15(2)b) – Value includes any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient and not included in the price.

(2) Section 15(2)(c) – Value of supply includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

(3) Section 15(2)(e) - Value of supply includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

(4) Section 15(3)(a) - 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.

Question-11 [ICAI-F-Jan21-6b-5] [Exp paid by recipient, Other exp, Intt, Disc on Inv, ITC]

X Ltd., a manufacturer of heavy machines registered at Mumbai (Maharashtra), supplied one machine to Y Ltd. in Pune (Maharashtra) on 19.02.2020 under an invoice of the same date. Using the information given below, compute the value of machine and the GST payable (CGST, SGST and IGST as the case may be) in cash for the month of February 2020 by X Ltd. with appropriate working notes.

Assume rate of CGST, SGST and IGST on the machine to be 9%, 9% and 18% respectively.

X Ltd. has no input tax credit balance at the beginning of February 2020. All the other conditions necessary for availing the eligible input tax credit have been fulfilled. There is no other transaction of supplies during the month of February 2020. X Ltd. and Y Ltd. are not related persons.

Provide your answers with reasons and with reference to the provisions of law.

Answer

Note

(1) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(2) Section 15(2)(b) - Value of supply includes any amount that the supplier is liable to pay but which has been incurred by the recipient and not included in the price actually paid or payable for such supply.

(3) Section 15(2)(d) – Value includes interest or late fee or penalty for delayed payment of any consideration for any supply

(4) Section 15(3)(a) - 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.

Question-12 [ICAI-F-M18-1a-10] [Other exp, Extended Warranty, Subsidy, Disc on Inv]

Laxmi Ltd. of Bhopal (Madhya Pradesh) is a supplier of machinery. Laxmi Ltd. has supplied machinery to PQR Enterprises in Indore (Madhya Pradesh) on 1^st Oct, 2017. The invoice for supply has been issued on 1^st Oct, 2017. Thus, the time of supply of machinery is 1^st Oct, 2017. Laxmi Ltd. and PQR Enterprise are not related.

Following information is provided:

Basic price of machinery excluding all taxes but including design and engineering charges of Rs.10,000 and loading charges of Rs.20,000 = Rs.20,00,000.

Laxmi Ltd. provides 2 years free warranty for the machinery. Laxmi Ltd. also provides an extended one year warranty on payment of additional charges of Rs.1,00,000. PQR Enterprises opted for one year warranty.

Laxmi Ltd. has collected consultancy charges in relation to pre-installation planning of Rs.10,000 and freight and insurance charges from place of removal to buyer's premises of Rs.20,000.

Laxmi Ltd. received subsidy of Rs.50,000 from Central Government for supplying the machinery to backward region since receiver was located in a backward region. Laxmi Ltd. also received Rs.50,000 from the joint venture partner of PQR Enterprises for making timely supply of machinery to the recipient.

A cash discount of 1% on the basic price of the machinery is offered at the time of supply, if PQR Enterprises agrees to make the payment within 30 days of the receipt of the machinery at his premises. Discount @ 1% was given to PQR Enterprises as it agreed to make the payment within 30 days.

The machinery attracts CGST and SGST @ 18% (9% + 9%) and IGST @18%.

Compute the CGST and SGST or IGST payable, as the case may be, on the machinery.

Answer

Answer

Computation of GST payable

Notes:

1. Laxmi Ltd. and PQR Enterprises are not related and price is assumed to be the sole consideration for the supply. Therefore, in terms of section 15(1) of the CGST Act, 2017, the value of the supply is the transaction value i.e., price actually paid or payable for the machinery by PQR Enterprises.

Design and engineering charges are includible in the value of supply as 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 so includible in terms of section 15(2)(c) of CGST Act, 2017.

Further, loading charges being incidental expenses charged by the supplier to the recipient of supply, are includible in the value as per section 15(2)(c) of the CGST Act, 2017.

2. Supply of machinery (goods) with supply of ancillary services like extended warranty, is a composite supply, the principle supply of which is the supply of machinery. [Section 2(30) of the CGST Act, 2017 read with section 2(90) of that Act]. Thus, value of such ancillary supply is includible in the value of composite supply.

3.Supply of machinery (goods) with supply of ancillary services like freight and insurance is a composite supply, the principle supply of which is the supply of machinery [Section 2(30) of the CGST Act, 2017 read with section 2(90) of that Act]. Thus, value of such ancillary supply is includible in the value of composite supply.

4. 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 in terms of section 15(2)(c) of CGST Act, 2017.

5. Subsidies provided by the Central Government and State Governments are not includible in the value of supply in terms of section 15(2)(e) of the CGST Act, 2017. However, subsidy directly linked to the price received from a non-Government body is includible in the value in terms of section 15.

6. Cash discount has been given to PQR Enterprises upfront at the time of supply and thus would have been recorded in the invoice and hence, the same is excluded from the value of supply in terms of section 15(3)(a) of the CGST Act, 2017.

7. In the given case-

• the location of the supplier is in Bhopal (Madhya Pradesh); and

• the place of supply of machinery is the location of the machinery at the time at which the movement of the same terminates for delivery to the recipient i.e., Indore (Madhya Pradesh) vide section 10(1)(a) of IGST Act, 2017.

Therefore, as per section 8(1) of IGST Act, 2017, the given supply is an intra-State supply as the location of the supplier and the place of supply are in the same State. Thus, the supply will be leviable to CGST and SGST.

*Note: It is also possible to take a view that the basic price of the machinery is Rs.19,70,000 [Rs.20,00,000 – Rs.10,000 – Rs.20,000] and design and engineering charges and loading charges are added to such price. In that case, 1% of discount amount will come out to be Rs.19,700, value of supply would be Rs.21,60,300 and CGST and SGST would be Rs.1,94,427 each.

Question-13 [ICMAI-F-J18-7b-8] [Other exp, Subsidy, Extended warranty, Disc on Inv]

Shankar Texmaco P Ltd. (STPL), having its registered office at Salem, Tamil Nadu, is a manufacturer of dyeing machinery. It manufactures and installs the machinery at the places opted by the buyers. For each machine manufactured and installed by it, STPL gets a subsidy of Rs. 3 lakhs.

Poorni Dyers Ltd. (PDL), having their registered office at Coimbatore, Tamil Nadu have ordered a machinery from STPL, to be erected at their place of manufacture at Palghat, Kerala. The base price of the machine is Rs. 25 lakhs. For each machinery, there is a separate handling charge of Rs. 50,000.

PDL have opted to take an additional warranty for Rs. 20,000 for an extended service period of 1 year, in addition to the free warranty provided by STPL.

The installation costs of Rs.80,000 charged by STPL, will be met by PDL.

STPL offers a cash discount of 2%, where the payment is made within a month. If the payment is not so made, it not only recovers the discount earlier offered, but also charges interest at 18% for the period of delay.

A machinery was supplied on 21st November, 2017, the tax invoice also being issued the same day.

Ascertain the transaction value of the machine sold to MTL and the GST payable [SGST & CGST or IGST] by STPL. You are further informed that MTL made the actual payment only on 10th January, 2018.

You are informed that the GST rates applicable for the product as under:

Answer

Note

Note

(1) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(2) Section 15(3)(a) - 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.

Question-14 [ICSI-P-D20-O-4c-5] [Other Exp, Extended warranty, Disc on Inv]

PQR Ltd., registered in the State of Karnataka, manufacturers of heavy duty machinery supplied on 10th March, 2020 Milling Machinery to JKS Ltd. for their Rice Mill set up at Chennai. Tax invoice was raised by the supplier immediately after supply on 10-03-2020. The details/particulars relating to the rice mill machinery so supplied by PQR Ltd. are as under :

JKS Ltd. made the payment of the machinery on 04-04-2020 and hence was denied for cash discount by PQR Ltd. All values/amounts given above are exclusive of the amount of GST. Applicable rates under GST are to be taken as SGST 9%, CGST 9% and IGST 18%.

Compute the transaction value and the amount of GST liability. Advice suitable working notes for the treatment of each item given while working out the amount of transaction value of the machinery.

Answer

Note

As per Section 10(1)(d) of the IGST Act, 2017, the place of supply of the machine is the place of installation of the machinery, which is Chennai, in Tamil Nadu. The location of the PQR Ltd. is in Karnataka. Thus, it will be an Inter-State supply and hence IGST is payable.

2. Extended warranty charges are includible since transaction value includes all items, except those which are specifically excluded.

3. Installation of machine is ancillary to the principal supply of machine, thus it is a case of composite supply in terms of Section 2(30) CGST Act, 2017 and therefore the value of installation is liable to be added in the value of machine and charged to tax accordingly.

4. “Cash discount offered at the time of original supply in the invoice is to be deducted” as the supplier is right in assuming that the payment shall be made by the recipient within 15 days. However, once the recipient fails to make payment within 15 days, the supplier is required to issue a debit note towards the value of discount along with GST.

15.3.2.1 Conditions for allowing post supplies discounts

T-1 [ICSI-P-D19-2A(i)(b)-2.5]

When would a discount be excluded from the value of supply? Will secondary discount issued for goods supplied be reduced in determining the value of supply?

Answer

Refer section 15(3)

T-2 [ICSI-E-D19-O-93-1] [ICMAI-I-D18-1a(iii)-1]

Which of the following shall not be included in the value of supply?

(A) Late fee; (B) Interest; (C) GST; (D) Commission

Question-1 [ICSI-P-J19-O-4A(ii)-5] [ICAI-I-Ch5-8] [Additional discount not as per contract]

Crunch Bakery Products Ltd sells biscuits and cakes through its dealers, to whom it charges the list price minus standard discount and pays GST accordingly. When goods remain unsold with the dealers, it offered additional discounts on the stock as an incentive to push the sales.

Can this additional discount be reduced from the price at which the goods were sold, and concomitant tax adjustments made?

Answer

(1) Statutory Provision

Section 15(3)(b) - The value of the supply shall not include any discount which is given after the supply, if

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) ITC attributable to the discount has been reversed by the recipient of the supply.

(2) Facts and Opinion

The discounts were not known or agreed for at the time of supply of goods to the dealers. Therefore, in terms of section 15(3), such discounts cannot be reduced from the price on which tax had been paid.

Question-2 [ICAI-F-Ch7-3] [Disc on inv and other disc]

Examine whether the following discounts ought to be excluded to determine the value of supply:

(i) Company offering 20% discount for single purchase above Rs.10,000.

(ii) Company offering additional discount of 1% on purchase of 10,000 pieces in a year.

(iii) After selling a product, the company re-valued the product at a lower value and issued credit note to the buyer for the differential amount.

Answer

(i) The given case is a case of staggered discounts where rate of discount increases with increase in purchase volume. Such discounts are shown on the invoice itself. Therefore, the same are excluded to determine the value of supply.

(ii) The given case is a case of volume discount which are offered by the suppliers to their stockists, etc. Such discounts are established in terms of an agreement entered into at or before the time of supply which can be specifically linked to the relevant invoices though not shown on the invoice as the actual quantum of such discounts gets determined after the supply has been effected and generally at the year end. Such type of volume discounts are excluded/deducted to determine the value of supply provided they satisfy the parameters laid down in section 15(3) including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document (s) issued by the supplier.

(iii) This is a case of secondary discounts. These are the discounts which are not known at the time of supply or are offered after the supply is already over as per the agreement made at or before the time of supply. Therefore, such discounts shall not be excluded while determining the value of supply.

Question-3 [ICAI-I-M19-O-7a-5] [ICAI-I-Ch5-12] [Exp paid by recipient, Other exp, Disc on Inv & additional Disc]

Koli Ltd., a registered supplier, has supplied machinery to Ghisa Ltd. (a supplier registered in the same State). It provides following particulars regarding the same:

Determine the value of taxable supply made by Koli Ltd. to Ghisa Ltd.

Answer

Note:

(1) Section 15(2)b) – Value includes any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient and not included in the price;

(2) Section 15(2)(c) - Value includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

(3) Section 15(3)(a) - 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.

(4) Section 15(3)(b)

The value of the supply shall not include any discount which is given after the supply, if

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) ITC attributable to the discount has been reversed by the recipient of the supply.

Though the additional discount is established before/at the time of supply, it is not deductible from the value of supply in terms of section 15(3)(b) as the same is not linked to any specific transaction and is adjusted by the parties at the end of financial year.

Question-4 [ICSI-P-D21-O-3b-5] [Other Taxes, Exp paid by recipient, Other exp, Disc on Inv & additional Disc]

X Ltd. supplies a generator set to Y Ltd. in the Intra-state supply, provides the following information:

(i) Discount @ 3% on generator price (recorded in Invoice)

(ii) X Ltd. provide additional discount of 1.5% at year end, based on additional purchase of other generator set.

Calculate the taxable value of supply of generator set under GST Law along with the reasons.

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(b) - Value of supply includes any amount that the supplier is liable to pay but which has been incurred by the recipient and not included in the price actually paid or payable for such supply.

(4) Section 15(3)(a) - 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;

(5) Additional discounts are not deductible because this discount is not link to above generator set and there is no prior agreement

Question-5 [ICAI-I-N20-6a-6] [Other taxes, Interest waived, Subsidy, Additional Disc]

Following are the particulars, relating to one of the machine sold by SQM Ltd. to ACD Ltd. in the month of February 2020 at list price of Rs.9,50,000. (exclusive of taxes and discount) Further, following additional amounts have been charged from ACD Ltd :

Additional information :

(i) SQM Ltd. normally gives an interest-free credit period of 30 days for payment, after that it charges interest @ 1% p.m. or part thereof on list price. ACD Ltd. paid for the supply after 45 days, but SQM Ltd. waived the interest payable.

(ii) SQM Ltd. received Rs.50,000 as subsidy, from one non-government organization (NGO) on sale of such machine. This subsidy was not linked to the price of machine and also not considered in list price of Rs.9,50,000.

(iii) ACD Ltd. deducted discount of Rs.15,000 at the time of final payment, which was not as per agreement.

(iv) SQM Ltd. collected Rs.9,500 as TCS (tax collected at source) under the provisions of the Income Tax Act, 1961.

Compute the value of taxable supply as per the provision of GST laws, considering that the price is the sole consideration for the supply and both parties are unrelated to each other.

Note: Correct legal provision should form part of your answer.

Answer

(1) Statutory Provision

Section 15(1) - The value of a supply shall be the transaction value, which is actually paid or payable for the said supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.

Section 15(2)(a) - Value includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

Section 15(2)(c) – Value includes amount charged for anything done by the supplier in respect of the supply at the time of or before delivery of goods or supply of services.

Section 15(2)(e) - Value includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

Section 15(3)(a) - 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.

Section 15(3)(b) The value of the supply shall not include any discount which is given after the supply, if

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) ITC attributable to the discount has been reversed by the recipient of the supply.

Calculation of taxable value

Question-6 [ICAI-I-M22-6a-6] [Other Taxes, Exp paid by recipient, Other exp, Intt, Subsidy & additional Disc]

XYZ Pvt. Ltd. provided the following particulars relating to goods sold by it to ABC Pvt. Ltd.

XYZ Pvt. Ltd. offers 2% turnover discount on the list price after reviewing the performance of ABC Pvt. Ltd. The discount was not known at the time of supply.

ABC Pvt. Ltd. delayed the payment and paid Rs.5,000 (including GST of 18%) as interest to XYZ Pvt. Ltd.

Determine the value of taxable supply made by XYZ Pvt. Ltd. under GST law

Answer

Note

(1) Section 15(2)(a) - Value of supply includes any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws if charged separately by the supplier.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

(4) Section 15(2)(b) - Value of supply includes any amount that the supplier is liable to pay but which has been incurred by the recipient and not included in the price actually paid or payable for such supply.

15.4.1 Value of supply if consideration is in terms of non-monetary item

Question-1 [ICMAI-I-D19-1(a)(iv)-1] [Clause 27(a)]

Where a desk-top printer is sold for Rs. 10,000 along with the exchange of an old printer and if the price of the new desk-top printer without exchange is Rs. 12,500, the taxable value for GST purpose would be

(A) Rs. 10,000

(B) Rs. 12,500

(C) Either (A) or (B)

(D) Rs.10,000 for the supplier and Rs. 2,500 for the customer

Question-1A [ICSI-E-D19-67-1]

What will the value of supply of the mobile phone sold by Micromax to Anil Kumar for Rs.35,000 in exchange with of his old mobile phone. The sale price of the new mobile phone without exchange is Rs.40,000. The value of old mobile phone so exchanged was of Rs.7,000.

(A) Rs.35,000; (B) Rs.40,000; (C) Rs.42,000; (D) Rs.33,000

Question-2 [ICAI-F-M19-O-3b-4] [ICAI-F-Ch7-14] [Clause 27(a) and (b)]

Dev Enterprises is the supplier of water coolers. Dev Enterprises supplied water coolers to Vimal Traders for consideration of Rs.2,95,000 (inclusive of GST @ 18%). Vimal Traders also gave some materials to Dev Enterprises as consideration for such supply whose value was Rs.10,000 (exclusive of GST).

Dev Enterprises has supplied the same goods to another person at price of Rs.2,97,360 (inclusive of GST@18%).

You are required to:

(1) Determine the value of goods supplied by Dev Enterprises to Vimal Traders as per the provisions of the CGST Act, 2017.

(2) What would your answer be if price of Rs.2,97,360 is not available at the time of supply of goods to Vimal Traders? Explain briefly.

Answer

(1) Open market value is available

A) Statutory Provision

i) Rule 27(a) - Where the supply is for a consideration not wholly in money, value of supply shall be open market value of such supply, if open market value is available.

ii) Explanation (a) to Rule 35

“open market value” means

full value of money excluding taxes under GST law payable by recipient, where such supply is between unrelated persons and price is the sole consideration for such supply

B) Facts

In the given case, price is not the sole consideration for the supply and

Open market value of the goods supplied is given i.e. Rs.2,52,000 (Rs.2,97,360 x 100/118)

Hence value of supply to Vimal Traders = Open market value = Rs,2,52,000

2) Open Market value is not available

A) Statutory Provision

i) Rule 27(b) - Where the supply is for a consideration not wholly in money and open market value of such supply is not available, then value of supply shall be consideration in monaey and equivalent money value of non-monetary item.

B) Facts

Therefore, the value of supply to Vimal Traders

= Consideration in money + Equivalent money value of non-monetary item

(Rs.2,95,000 x 100/118) + Rs.10,000 = s.2,60,000.

15.4.2 Value of supply between distinct or related persons, other than through an agent

Question-1 [ICSI-P-J19-3d-4] [Value of supply of like kind and quality]

Saraswathi Polymers Pvt. Ltd., has two units, one in Coimbatore, Tamil Nadu and another in Thrissur, Kerala. In the Coimbatore unit, it manufactures customised products only. Each lot consists of 100 units and is valued at Rs.5 lakhs. These products require further processing before delivery to the customers.

The further processing is done by the 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 Rs.3.5 lakhs per 100 units.

You are required to determine the value of 100 units supplied by the Tamil Nadu Unit of the registered supplier to its Kerala unit as per provisions of the CGST Act, 2017.

Answer

1) Statutory Provision

i) Section 25(4) - a person who has obtained more than one registration, whether in one or more than one State/UT, in respect of each such registration, be treated as distinct persons.

ii) Rule 28 - Where the supply is between distinct persons as per section 25(4) or (5) or related person, other than where the supply is made through an agent, Value of supply 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 like kind and quality;

(c) if the value is not determinable u/c (a) or (b), be the value as determined u/r 30 or 31, in that order:

2) Facts

Both the units of SP Pvt Ltd in TN and Kerala are distinct person as per section 25(4).

In the given case, open market value of the 100 units being supplied to Kerala unit is not available since the supplier manufactures customized products. Therefore the value of 100 units supplied by Tamil Nadu unit of Saraswathi polymers Pvt. Ltd. To Kerala unit will be the value of the goods of similar kind and quality supplied to Kerala unit by other customers which is being Rs.3.5 lacs.

Question-2 [ICSI-P-D21-2a-5] [Rule 30]

Jagatguru Textiles Ltd. transfers from Bellary in Karnataka stocks of 15,000 meters of cloth having cost of Rs.15,00,000 requiring further processing before sale to its Bhilwara branch located in Rajasthan from where it is being sold. The Bhilwara branch, apart from processing its own goods is also engaged in processing of the similar nature goods for other persons located in Rajasthan.

There are no other factories in the neighboring area of Bellary in Karnataka who are engaged in the same business work of processing as being done by the Bhilwara, Rajasthan unit of Jagatguru Textiles Ltd. Other persons located in Rajasthan supply the same variety of goods in lots of 15,000 meters each time and thereafter make sells of such processed goods to wholesellers. The price of such lot of goods in the market is Rs.14,75,000. Determine the value of supply in the aforesaid case by explaining in brief the provisions of CGST Act, 2017.

Answer

1) Statutory Provision

i) Section 25(4) - a person who has obtained more than one registration, whether in one or more than one State/UT, in respect of each such registration, be treated as distinct persons.

ii) Rule 28 - Where the supply is between distinct persons as per section 25(4) or (5) or related person, other than where the supply is made through an agent, Value of supply 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 like kind and quality;

(c) if the value is not determinable u/c (a) or (b), be the value as determined u/r 30 or 31, in that order:

2) Facts

Both the units of Jagatguru in Karnatka and Rajshthan are distinct person as per section 25(4).

In this case, although goods of like kind and quality are available, the same may not be accepted as the 'like goods' since they are supplied by another manufacturers located in Rajasthan whereas supplier in the case of Jagatguru Textiles is located at Bellary in Karnataka. Transportation cost in respect of manufacturers of Rajasthan are lower and thus less expensive in comparison to goods under consideration which were supplied from Karnataka.

Therefore, the value of the supply would be taken as per Rule 30 at 110% of the cost (110% x 15,00,000) = Rs.16,50,000 for charge of GST.

Alternative answer

In this case, goods of like kind and quality are available, hence same may be accepted as the 'like goods'. Value of supply = Rs.14,75,000

15.4.2.2 If full ITC is available to recipient, then Open market value = Invoice value

Question-1 [ICAI-F-Ch7-13]***

X & Co. manufactures customized products at its unit situated and registered in MP. Cost of production of 1,000 products for X & Co. is Rs.20,00,000. These products require further processing before sale, and for this purpose products are transferred from its MP unit to its another unit situated and registered in HP. The value declared on the invoice for such transfer is the cost of production of such products. The HP unit, apart from processing its own products, engages in processing of similar products of other persons who supply the products of the same kind and quality. Thereafter, the HP unit sells these processed products to wholesalers. There are no other factories in the neighbouring area which are engaged in the same business as that of HP unit. 1,000 units of the products of same kind and quality are supplied to HP unit, at the time when goods are sent by MP unit, by another manufacturer located in HP. The ex-factory price of such goods is Rs.19,00,000. The HP unit of X & Co. is eligible for full ITC. Determine the value of 1000 products supplied by Rustagi & Co. to its HP unit.

Answer

1) Statutory Provision

i) Section 25(4) - a person who has obtained more than one registration, whether in one or more than one State/UT, in respect of each such registration, be treated as distinct persons. Therefore, units of X & Co. in MP and HP are distinct persons under GST.

ii) Rule 28 - Where the supply is between distinct persons as per section 25(4) or (5) or related person, other than where the supply is made through an agent, Value of supply 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 like kind and quality;

(c) if the value is not determinable u/c (a) or (b), be the value as determined u/r 30 or 31, in that order:

iii) 2^nd Proviso to Rule 28

where the recipient is eligible for full ITC, the value declared in the invoice shall be deemed to be the open market value of the goods or services.

1) Facts

Since both the units in MP and HP are distinct person as per section 25(4) and also HP units is eligible for full ITC

And as per 2^nd Proviso to rule 28, Open Market value = Value declared in the invoice = Rs.20,00,000

As per Rule 28, Value of supply by MP to HP units = Open Market value = Rs.20,00,000

15.4.3 Value of supply i.e made through an agent

T-1 [ICAI-F-Ch7-5]

The supplies of commodity ‘y’ to the market are channelled through a State Marketing Corporation which conducts an auction each day to arrive at the price. Gupta and Co. supplies commodity ‘y’ through the State Marketing Corporation.

How will the supply of ‘y’ made by Gupta and Co. to State Marketing Corporation be valued for paying tax?

Answer

The State Marketing Corporation is an ‘agent’ in the meaning of the expression as defined in section 2(5), which includes an auctioneer. Therefore, the value of supply of ‘y’ will be determined in terms of rule 29 relating to valuation.