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15.2.1 Value includes taxes, duties etc other than GST & GST Compensation Cess
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
E |
D20 |
76 |
1 |
Question-1A |
ICSI |
E |
D19 |
69 |
1 |
Question-2 |
ICMAI |
F |
J18 |
5b |
4 |
Question-3 |
ICSI |
E |
J22 |
79 |
1 |
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
|
Tamil Movie (Rs.) |
Hindi Movie (Rs.) |
Ticket Rate |
90 |
90 |
Entertainment Tax |
9 |
18 |
Taxable value per Ticket |
99 |
108 |
No of Tickets |
2,000 |
1,500 |
Total Taxable Value |
1,98,000 |
1,62,000 |
GST Rate |
18% |
28% |
GST liability |
35,640 |
45,360 |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
P |
D19 |
2A(i)(b) |
2.5 |
Repeated |
ICAI |
F |
Ch7 |
1 |
NA |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
P |
D18 |
5a(iii) |
2 |
Question-2 |
ICSI |
E |
D21 |
84 |
1 |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
F |
Ch7 |
2 |
NA |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
I |
Ch5 |
4 |
NA |
Question-2 |
ICAI |
F |
N19 |
3b |
4 |
Question-3 |
ICAI |
I |
Ch5 |
5 |
NA |
Question-4 |
ICAI |
F |
Ch7 |
8 |
NA |
Question-5 |
ICAI |
F |
M18-O |
3b |
4 |
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
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
Remark |
(i) |
(ii) |
Value of goods |
80,000 |
80,000 |
Freight and transit insurance |
12,000 |
- |
Taxable Value |
92,000 |
80,000 |
IGST @ 5% |
4,600 |
4,000 |
Invoice value |
96,000 |
84,000 |
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
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
Particulars |
Rs. |
Rent of the commercial building |
19,50,000 |
Maintenance charges paid to the local society, reimbursed by Bharat [Note 1] |
1,00,000 |
Municipal tax paid by Dushyant but not charged from recipient [Note 2] |
Nil |
Value of supply |
20,50,000 |
GST @ 18% |
3,69,000 |
Note
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:
Particulars |
Rs. |
Rent of the commercial building |
18,00,000 |
Maintenance charges collected by local society from the owner and reimbursed by the tenant |
2,50,000 |
Owner intends to charge GST on refundable advance, as GST is applicable on advance |
6,00,000 |
Municipal taxes paid by the owner |
3,00,000 |
GST rates applicable on renting of business premises is as follows: CGST 9%; SGST 9%
Provide suitable explanations where required
Answer
Particulars |
(Rs.) |
Rent of the commercial building |
18,00,000 |
Maintenance charges collected by the local society from the owner and reimbursed by the tenant [Note-1] |
2,50,000 |
Refundable advance [Being refundable, the advance is in the nature of security deposit which does not constitute consideration in terms of section 2(31) of the CGST Act, 2017 and thus, is not includible in the value] |
Nil |
Municipal taxes paid by the owner [Being an expenditure incurred by the supplier, the same is not includible in the value, assuming that such taxes are not charged to the recipient.] |
Nil |
Value of supply |
20,50,000 |
CGST @ 9% |
1,84,500 |
SGST @ 9% |
1,84,500 |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
E |
D22 |
66 |
1 |
Question-2 |
ICAI |
I |
Ch5 |
7 |
NA |
Question-3 |
ICSI |
E |
D19-O |
91 |
1 |
Question-4 |
ICAI |
I |
Ch5 |
Ill-2 |
NA |
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
Particulars |
Rs. |
List price of the goods |
1,40,000 |
Packing & Transportation charges [Note-1] |
18,000 |
Interest for delayed payment [Note-2] |
8,000 |
Value of supply |
1,66,000 |
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
Particulars |
Rs. |
Service charges |
5,00,000 |
Payment made by New Moon Pvt. Ltd to vendor of Samriddhi Advertisers [Note-1] |
20,000 |
Interest for delay in payment of consideration [Note-2] |
15,000 |
Value of taxable supply |
5,35,000 |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
E |
D18-O |
84 |
1 |
Question-2 |
ICAI |
I |
Ch5 |
3 |
NA |
Question-3 |
ICAI |
I |
Ch5 |
6 |
NA |
Question-4 |
ICMAI |
I |
D19 |
3b(ii) |
5 |
Question-5 |
ICAI |
I |
Ch5 |
9 |
NA |
Question-5A |
ICAI |
I |
M18 |
9a |
5 |
Question-6 |
ICAI |
I |
Ch5 |
11 |
NA |
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:
Particulars |
Rs. |
Subsidy directly linked to the supply and received from a Charitable Trust engaged in promotion of solar cookers. |
16,000 |
Subsidy from the Central Government as it also wants to promote solar products in the country. |
24,000 |
Answer
Answer
1 |
Value charged for supply |
40,000 |
2 |
Subsidy directly linked to the supply and received from a Charitable Trust [Note-1] |
16,000 |
3 |
Subsidy from the Central Government [Note-1] |
- |
|
Taxable value |
56,000 |
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.
SN |
Particulars |
Rs. |
1 |
List price of taxable goods supplied inter-state (exclusive of taxes) |
15,00,000 |
2 |
Subsidy received from the Central Government for supply of taxable goods to Government School (exclusively related to supply of goods included at S. No. 1) |
2,10,000 |
3 |
Subsidy received from an NGO for supply of taxable goods to an old age home (exclusively related to supply of goods included at S. No. 1) |
50,000 |
4 |
Tax levied by Municipal Authority |
20,000 |
5 |
Packing charges |
15,000 |
6 |
Late fee paid by the recipient of supply for delayed payment of consideration (Recipient has agreed to pay Rs.6,000 in lump sum and no additional amount is payable by him) |
6,000 |
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
1 |
List price of taxable goods supplied inter-state (exclusive of taxes) |
15,00,000 |
2 |
Subsidy received from the Central Government [Note-1] |
- |
3 |
Subsidy received from an NGO (exclusively related to supply of goods) [Note-1] |
50,000 |
4 |
Tax levied by Municipal Authority [Note-2] |
20,000 |
5 |
Packing charges [Note-3] |
15,000 |
6 |
Late fee paid by the recipient of supply for delayed payment of consideration = 6,000*100/118 [Note-4] |
5,065 |
|
Taxable value |
15,90,085 |
Note
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.
Particulars |
(Rs.) |
List price of goods supplied inter-state |
12,40,000 |
Items already adjusted in the price given in (i) above: |
|
(1) Subsidy from Central Government for supply of biscuits to Government School. |
1,20,000 |
(2) Subsidy from Trade Association for supply of quality biscuits. |
30,000 |
Items not adjusted in the price given in (i) above: |
|
(3) Tax levied by Municipal Authority |
24,000 |
(4) Packing Charges |
12,000 |
(5) Late fee paid by the recipient of supply for delayed payment of invoice |
5,000 |
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
Particulars |
(Rs.) |
List Price of the goods [Note-1] |
12,40,000 |
Subsidy amounting to Rs.1,20,000 received from Central Government [Note-2] |
Nil |
Subsidy received from Trade Association [Note-2] |
30,000 |
Tax levied by the Municipal Authority [Note-3] |
24,000 |
Packing charges [Note-4] |
12,000 |
Late fees paid by recipient of supply for delayed payment [Note-5] |
5,000 |
Value of taxable supply |
13,11,000 |
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.
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
SN |
Particulars |
Rs. |
1 |
Price of the goods [excluding taxes and other charges mentioned at S. Nos. (iii), (v) and (vi)] |
1,00,000 |
2 |
Municipal tax |
2,000 |
3 |
Inspection charges |
15,000 |
4 |
Subsidy received from Shri Ram Trust [Subsidy is directly linked to the goods supplied] |
50,000 |
5 |
Late fees for delayed payment inclusive of GST [Shri Balram Pvt. Ltd. paid the late fees. However, these charges were ultimately waived by Shri Krishna Pvt. Ltd. and the amount was refunded to Shri Balram Pvt. Ltd. during the same month] |
1,000 |
6 |
Weighment charges [Such charges were paid by Shri Balram Pvt. Ltd. to Radhe Pvt. Ltd. on behalf of Shri Krishna Pvt. Ltd.] |
2,000 |
Answer
1 |
Price of the goods |
1,00,000 |
2 |
Municipal tax [Note-1] |
2,000 |
3 |
Inspection charges [Note-2] |
15,000 |
4 |
Subsidy received from Shri Ram Trust [Note-3] |
50,000 |
5 |
Late fees for delayed payment inclusive of GST [Not includible since the same is waived off] |
- |
6 |
Weighment charges [Note-2] |
2,000 |
|
Value of taxable supply |
1,69,000 |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
E |
D20 |
72 |
1 |
Question-2 |
ICSI |
E |
J21 |
63 |
1 |
Question-3 |
ICSI |
E |
D19-O |
92 |
1 |
Question-4 |
ICSI |
E |
J19 |
6A(ii) |
5 |
Question-5 |
ICSI |
P |
J21 |
2A(iii) |
5 |
Question-6 |
ICSI |
E |
J21 |
65 |
1 |
Question-7 |
ICAI |
I |
Ch5 |
Ill-1 |
NA |
Question-8 |
ICSI |
E |
D20 |
75 |
1 |
Question-8A |
ICSI |
E |
D19 |
68 |
1 |
Question-8B |
ICSI |
E |
D18 |
5e |
3 |
Question-8C |
ICSI |
P |
D20-O |
3a |
5 |
Question-8D |
ICMAI |
I |
J18 |
3b |
7 |
Question-8E |
ICAI |
F |
M18-O |
1a |
5 |
Repeated |
ICAI |
F |
Ch7 |
9 |
NA |
Question-9 |
ICSI |
P |
J19 |
2A(i) |
5 |
Question-10 |
ICAI |
I |
Ch5 |
10 |
NA |
Question-11 |
ICAI |
F |
Jan21 |
6a |
5 |
Question-12 |
ICAI |
F |
M18 |
1a |
10 |
Question-13 |
ICMAI |
F |
J18 |
7b |
8 |
Question-14 |
ICSI |
P |
D20-O |
4c |
5 |
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
Particulars |
Rs. |
List price of goods |
3,60,000 |
Packing charges [Note-1] |
15,000 |
Total |
3,75,000 |
Less: Discount [Note-2] |
20,000 |
Value of Taxable supply |
3,55,000 |
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:
Particulars |
Amount (Rs.) |
Price of generator before taxes and cash discount |
9,00,000 |
Other charges not included in the above price: |
|
Packing charges |
15,000 |
Designing charges for the generator |
18,000 |
Freight |
12,000 |
Transit insurance |
12,000 |
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
Particulars |
Rs. |
List price of goods |
9,00,000 |
Packing charges [Note-1] |
15,000 |
Designing charges for the generator [Note-1] |
18,000 |
Freight [Note-1] |
12,000 |
Transit insurance [Note-1] |
12,000 |
Total |
9,57,000 |
Less: Discount [Note-2] |
27,000 |
Value of Taxable supply |
9,30,000 |
GST Payable @18% |
1,67,400 |
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.
Particulars |
Rs. |
Contracted value of supply excluding GST (inclusive of cost of primary packaging of Rupees 25,000 and protective packing at the request of customer of Rupees 15,000) |
12,50,000 |
Weighment charges shown separately in the invoice |
9,500 |
Commission paid to local Agent on instruction of supplier |
5,000 |
Freight and insurance charges paid by receipient on behalf of supplier |
8,000 |
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
Particulars |
Rs. |
Contracted value of supply (inclusive of packaging and protective packing) |
12,50,000 |
Weighment charges shown separately in the invoice [Note-1] |
9,500 |
Commission paid to local Agent on instruction of supplier [Note-2] |
5,000 |
Freight and insurance charges paid by receipient on behalf of supplier [Note-2] |
8,000 |
Total |
12,72,500 |
Less: Discount @ 1% [Note-3] |
12,500 |
Value of Taxable supply |
12,60,000 |
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
Particulars |
Rs. |
Value of goods supplied |
4,15,000 |
Packing charges [Note-1] |
10,000 |
Subsidy received from a non-Government body [Note-2] |
25,000 |
Total |
4,50,000 |
Less: Discount @ 2% on Rs.4,50,000 [Note-3] |
9,000 |
Value of Taxable supply |
4,41,000 |
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.
Particulars |
Rs. |
List price of the goods (exclusive of taxes and discounts) |
50,000 |
Tax levied by Municipal Authority on the sale of such goods |
5,000 |
Packing charges (not included in price above) |
1,000 |
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
Particulars |
Rs. |
List price of the goods (exclusive of taxes and discounts) |
50,000 |
Tax levied by Municipal Authority on the sale of such goods [Note-1] |
5,000 |
Packing charges [Note-2] |
1,000 |
Subsidy received from a non-Government body [Note-3] |
2,000 |
Total |
58,000 |
Less: Discount @ 2% on Rs.50,000 [Note-4] |
1,000 |
Value of Taxable supply |
57,000 |
Note
(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.
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
Particulars |
Rs. |
Value of supplies |
3,50,000 |
Tax levied by Municipal Authority on the sale of such goods [Note-1] |
35,000 |
GST [Note-1] |
|
Packing charges [Note-2] |
5,000 |
Subsidy received from a non-Government body [Note-3] |
20,000 |
Total |
4,10,000 |
Less: Discount @ 2% on invoice value [Note-4] |
8,200 |
Value of Taxable supply |
4,01,800 |
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
Particulars |
Rs. |
Value of supplies |
5,50,000 |
Tax levied by Municipal Authority on the sale of such goods [Note-1] |
55,000 |
GST [Note-1] |
Nil |
Packing charges [Note-2] |
15,000 |
Subsidy received from a non-Government body [Note-3] |
25,000 |
Total |
6,45,000 |
Less: Discount @ 2% on invoice value [Note-4] |
6,450 |
Value of Taxable supply |
6,38,550 |
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
Particulars |
Rs. |
Value of supplies |
9,00,000 |
Tax levied by Municipal Authority on the sale of such goods [Note-1] |
90,000 |
GST [Note-1] |
Nil |
Packing charges [Note-2] |
25,000 |
Subsidy received from a non-Government body [Note-3] |
60,000 |
Total |
10,75,000 |
Less: Discount @ 1% on invoice value [Note-4] |
10,750 |
Value of Taxable supply |
10,64,250 |
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:
Particulars |
Rs. |
List price of the goods sold (exclusive of taxess and discounts) |
2,50,000 |
Tax levied by Municipal Authority on the sale of such goods |
7,500 |
Packing charges (not included in price above) |
5,000 |
CGST and SGST chargeable on the goods |
49,280 |
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
Particulars |
Rs. |
List price of the goods sold (exclusive of taxes and discounts) |
2,50,000 |
Tax levied by Municipal Authority on the sale of such goods [Note-1] |
7,500 |
GST [Note-1] |
Nil |
Packing charges [Note-2] |
5,000 |
Subsidy received from a non-Government body [Note-3] |
7,500 |
Total |
2,70,000 |
Less: Discount @ 2% of list price [Note-4] |
5,000 |
Value of Taxable supply |
2,65,000 |
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.:
Particulars |
Rs. |
List price of the goods sold (exclusive of taxess and discounts) |
10,00,000 |
Tax levied by Municipal Authority on the sale of such goods |
1,00,000 |
Packing charges (not included in price above) |
20,000 |
CGST and SGST chargeable on the goods |
2,00,800 |
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
Particulars |
Rs. |
List price of the goods sold (exclusive of taxes and discounts) |
10,00,000 |
Tax levied by Municipal Authority on the sale of such goods [Note-1] |
1,00,000 |
GST [Note-1] |
Nil |
Packing charges [Note-2] |
20,000 |
Subsidy received from a non-Government body [Note-3] |
40,000 |
Total |
11,60,000 |
Less: Discount @ 2% of list price [Note-4] |
20,000 |
Value of Taxable supply |
11,40,000 |
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.:
Particulars |
Rs. |
List price of the goods (exclusive of taxes/duties and discounts) |
76,000 |
Special packing at the request of customer to be charged to the customer |
5,000 |
Duty levied by local authority on the sale of such goods |
4,000 |
CGST and SGST charged separately in invoice |
14,400 |
Subsidy received from an NGO in relation to the goods sold (The price of Rs.76,000 given above is after considering the subsidy) |
5,000 |
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
Particulars |
Rs. |
List price of the goods |
76,000 |
Special packing at the request of customer to be charged to the customer [Value includes other charges as per Section 15(2)(c)] |
5,000 |
Duty levied by local authority on the sale of such goods [Other duties and taxes are included as per Section 15(2)(c)] |
4,000 |
CGST and SGST charged separately in invoice [GST is not includible as per Section 15(2)(c)] |
- |
Subsidy received from an NGO in relation to the goods sold [Subsidies from other person directly linked to price is included section 15(2)(e)] |
5,000 |
Less: Discount = 3% of List price = Rs.76,000 × 3% [Dis given on invoice is deductible Section 15(3)(a)] |
(2,280) |
Taxable Value |
87,720 |
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)(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.
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:
Particulars |
Rs. |
List price of goods supplied (exclusive of taxes and discount) |
12,00,000 |
Subsidy received from Central Government for supply of taxable goods to Government school. Directly linked to price |
1,10,000 |
CGST and SGST chargeable on the goods |
50,000 |
Tax levied by Municipal Authority |
25,000 |
Secondary packing charged |
10,000 |
(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
Particulars |
Rs. |
List price of goods supplied (exclusive of taxes and discount) |
12,00,000 |
Subsidy received from Central Govt. [Note-3] |
Nil |
CGST and SGST chargeable on the goods [Note-1] |
Nil |
Tax levied by Municipal Authority [Note-1] |
25,000 |
Secondary packing charged [Note-2] |
10,000 |
Total |
12,35,000 |
Less: Discount @ 2% on list price [Note-4] |
24,000 |
Value of Taxable supply |
12,11,000 |
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
SN |
Particulars |
Rs. |
1 |
Price of the machine [excluding taxes and other charges mentioned at S. Nos. (ii) and (iii)] |
25,000 |
2 |
Third party inspection charges [Such charges were payable by M/s Flow Pro but the same have been directly paid by BP Ltd. to the inspection agency. These charges were not recorded in the invoice issued by M/s Flo Pro.] |
5,000 |
3 |
Freight charges for delivery of the machine [M/s Flow Pro has agreed to deliver the goods at BP Ltd.’s premises] |
2,000 |
4 |
Subsidy received from the State Government on sale of machine under Skill Development Programme [Subsidy is directly linked to the price] |
5,000 |
5 |
Discount of 2% is offered to BP Ltd. on the price mentioned at S. No. (i) above and recorded in the invoice |
- |
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
1 |
Price of the machine |
25,000 |
2 |
Third party inspection charges [Note-1] |
5,000 |
3 |
Freight charges for delivery of the machine. Assuming it has not been included in the price. [Note-2] |
2,000 |
4 |
Subsidy received from the State Government [Note-3] |
- |
5 |
Discount of 2% is offered to BP Ltd. on the price = 25,000*2% [Note-4] |
(500) |
|
Taxable Value |
31,500 |
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.
Particulars |
Rs. |
The basic price of the machine (exclusive of taxes and discount) |
18,00,000 |
Trade discount is allowed at 10% on the basic price and is shown in the invoice. |
1,80,000 |
Secondary packing (in iron sheets) charged for safe transportation of the machine on the request of buyer |
30,000 |
Design and engineering charges of the machine paid by Y Ltd. to X Ltd. |
90,000 |
Pre-delivery inspection charges paid by Y Ltd. to an independent agency "Inspection India". In terms of the agreement for supply, it was the discretion of the buyer 'Y Ltd.' to appoint, if it so desires, any agency for pre-delivery inspection, and also to itself pay to such agency. |
22,000 |
Interest amount paid by Y Ltd. for delay in payment of the machine, said interest was paid by Y Ltd. in April 2020 |
12,000 |
INWARD SUPPLY: IGST paid on food items for consumption by employees working in the factory. The said food items are provided as per the declared company policy which is duly informed to the employees while they are recruited and forms part of their appointment letter, though there is no such obligation in law. |
10,000 |
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
Particulars |
Rs. |
The basic price of the machine (exclusive of taxes and discount) |
18,00,000 |
Secondary packing (in iron sheets) charged for safe transportation of the machine on the request of buyer [Notq-1] |
30,000 |
Design and engineering charges of the machine paid by Y Ltd. to X Ltd. [Notq-1] |
90,000 |
Pre-delivery inspection charges [Note-2] [The amount incurred by the recipient of the supply is added only if the same was the liability of the supplier.] |
Nil |
Interest amount paid = 12000/1.18 [Note-3] |
10,169 |
Total |
19,32,000 |
Trade discount is allowed at 10% on the basic price and is shown in the invoice. [Note-4] |
1,80,000 |
Value of Taxable supply |
17,50,169 |
Less: Interest for delayed payment liable to tax only on date of receipt |
10,169 |
Taxable value of the machine in February, 2020 |
17,40,000 |
Tax Liability CGST 9% and SGST 9% |
3,13,200 |
Less: ITC [ITC on supply of, inter alia, food and beverages is blocked if the employer is not under a statutory obligation to provide the same to its employees] |
Nil |
GST Payable on Cash |
3,13,200 |
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 1st Oct, 2017. The invoice for supply has been issued on 1st Oct, 2017. Thus, the time of supply of machinery is 1st 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
Particulars |
(Rs.) |
Price of the machinery [Note 1] |
20,00,000 |
Add: Extended warranty cost [Note 2] |
1,00,000 |
Consultancy charges in relation to pre-installation planning [Note 4] |
10,000 |
Freight and insurance charges [Note 3] |
20,000 |
Subsidy received from Central Government [Note 5] |
Nil |
Receipts from Joint Venture of PQR Enterprises [Note 5] |
50,000 |
Less: 1% discount on basic price*= `20,00,000 x 1% [Note 6] |
(20,000) |
Value of supply |
21,60,000 |
CGST @ 9% [Note 7] |
1,94,400 |
SGST @ 9% [Note 7] |
1,94,400 |
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:
Particulars |
Rate |
CGST |
6% |
SGST |
6% |
IGST |
12% |
Answer
Particulars |
Rs. |
Basic price of the Machinery |
25,00,000 |
Handling charge [Note-1] |
50,000 |
Installation charges [Note-1] |
80,000 |
Subsidy [Assuming from other directly linked with price] |
3,00,000 |
Extended warranty taken by the buyer for the machinery from the suppliers [Note-2] |
20,000 |
Total |
29,50,000 |
Cash Discount 2% [Assuming on basic price] [Note-2] |
50,000 |
Value of Taxable supply |
29,00,000 |
IGST @12% |
3,48,000 |
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 :
Particulars |
(Rs.) |
Basic price of the Machinery |
50,00,000 |
Installation of the Machine, costs are to be met by the buyer |
1,20,000 |
Extended warranty taken by the buyer for the machinery from the suppliers |
1,00,000 |
Cash discount as per invoice, but to be allowed only where payment is made in 15 days of supply |
2% of the basic price |
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
Particulars |
Rs. |
Basic price of the Machinery |
50,00,000 |
Installation of the Machine, costs are to be met by the buyer [Note-3] |
1,20,000 |
Extended warranty taken by the buyer for the machinery from the suppliers [Note-2] |
1,00,000 |
Total |
52,20,000 |
Cash Discount [Note-4] |
1,00,000 |
Value of Taxable supply |
51,20,000 |
IGST @18% |
9,21,600 |
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
Question No. |
Institute |
Level |
Term |
QN |
M |
T-1 |
ICSI |
P |
D19 |
2A(i)(b) |
2.5 |
T-2 |
ICSI |
E |
D19-O |
93 |
1 |
Repeated |
ICMAI |
I |
D18 |
1a(iii) |
1 |
Question-1 |
ICSI |
P |
J19-O |
4A(ii) |
5 |
Repeated |
ICAI |
I |
Ch5 |
8 |
NA |
Question-2 |
ICAI |
F |
Ch7 |
3 |
NA |
Question-3 |
ICAI |
I |
M19-O |
7a |
5 |
Repeated |
ICAI |
I |
Ch5 |
12 |
NA |
Question-4 |
ICSI |
P |
D21-O |
3b |
5 |
Question-5 |
ICAI |
I |
N20 |
6a |
6 |
Question-6 |
ICAI |
I |
M22 |
6a |
6 |
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:
SN |
Particulars |
Rs. |
1 |
Price of machinery (exclusive of taxes and discounts) |
5,50,000 |
2 |
Part fitted in the machinery at the premises of Ghisa Ltd. [Amount has been paid by Ghisa Ltd. directly to the supplier. However, it was Koli Ltd.’s liability to pay the said amount. The said amount has not been recorded in the invoice issued by Koli Ltd.) |
20,000 |
3 |
Installation and testing charges for machinery, not included in price |
25,000 |
4 |
Discount @ 2% on price of the machinery mentioned at S. No. (i) above (recorded in the invoice) |
|
5 |
Koli Ltd. provides additional discount @ 1% at year end, based on additional purchase of other machinery for which adjustment is made at the end of the financial year without any change in individual transactions. |
|
Determine the value of taxable supply made by Koli Ltd. to Ghisa Ltd.
Answer
SN |
Particulars |
Rs. |
1 |
Price of machinery |
5,50,000 |
2 |
Amount paid by Ghisa Ltd. directly to the supplier for the part fitted in the machinery [Note-1] |
20,000 |
3 |
Installation and testing charges [Note-2] |
25,000 |
4 |
Less: Discount @ 2% on the price of machinery [Rs.5,50,000 x 2%] [Note-3] |
11,000 |
5 |
Less: Additional 1% discount at year end [Note-4] |
- |
|
Value of taxable supply |
5,84,000 |
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:
Particulars |
Rs. |
Price of generator set |
8,70,000 |
Installation charges for the generator |
34,000 |
Entry fees levied by the Municipal Corporation |
6,000 |
One part is directly fitted in generator set at place of Y Ltd. (amount paid by Y Ltd directly to supplier, as per contract this amount should be paid by X Ltd, included in the price of generator set) |
3,000 |
(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
Particulars |
Rs. |
Price of generator set |
8,70,000 |
Installation charges for the generator [Note-2] |
34,000 |
Entry fees levied by the Municipal Corporation [Note-1] |
6,000 |
Amount paid by Y Ltd directly to supplier, already included in above price [Note-3] |
Nil |
Total |
9,10,000 |
Less: Discount @ 3% [Note-4] |
26,100 |
Less: Additional Dis. [Note-5] |
Nil |
Value of Taxable supply |
8,83,900 |
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 :
SN |
Particulars |
Rs. |
1 |
Municipal taxes chargeable on the machine |
45,000 |
2 |
Outward freight charges (Contract was to deliver machine at ACD Ltd.’s factory i.e. F.O.R. contract) |
65,000 |
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
Particulars |
Rs. |
List price of the goods |
9,50,000 |
Municipal taxes chargeable on the machine [Includible in value in terms of section 15(1) & 15(2)(a)] |
45,000 |
Outward freight charges (Contract was to deliver machine at ACD Ltd.’s factory i.e. F.O.R. contract) [Includible in value in terms of section 15(1) & 15(2)(c)] |
65,000 |
Interest waived [Not includible in value in terms of section 15(1) & 15(2)(d) as same is not received] |
Nil |
Subsidy received Rs.50,000 from NGO not linked to the price [Subsidy received from non govt. and not directly linked to price, is includible in the value in terms of section 15(2)(e).] |
Nil |
Discount [Not deductible as it is not in terms of contract entered at or before supply] |
Nil |
TCS [not includible in the value of supply as it is an interim levy not having the |
Nil |
Taxable Value |
10,60,000 |
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.
Particulars |
Rs. |
List price of the goods (exclusive of taxes and discount) |
50,000 |
Tax levied by the Municipal Authority on the sale of such goods |
6,000 |
Packing charges (not included in the list price above) |
2,500 |
Subsidy received from a NGO, directly linked to price (included in the list price above) |
3,000 |
Paid to one of the vendors by ABC Pvt.in relation to the service provided by the vendor to XYZ Pvt. Ltd. (not included in the list price above) |
2,000 |
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
Particulars |
Rs. |
List price of the goods (exclusive of taxes and discount) |
50,000 |
Tax levied by the Municipal Authority on the sale of such goods [Note-1] |
6,000 |
Packing charges [Note-2] |
2,500 |
Subsidy received from a NGO, directly linked to price (included in the list price above) [Note-3] |
Nil |
Paid to one of the vendors by ABC Pvt.in relation to the service provided by the vendor to XYZ Pvt. Ltd. [Note-4] |
2,000 |
Interest for delayed payment [5,000*1/1.18] [Note-5] |
4,238 |
Total |
64,737 |
Less: Additional Dis. [Note-6] |
Nil |
Value of Taxable supply |
67,737 |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICMAI |
I |
D19 |
1(a)(iv) |
1 |
Question-1A |
ICSI |
E |
D19 |
67 |
1 |
Question-2 |
ICAI |
F |
M19-O |
3b |
4 |
Repeated |
ICAI |
F |
Ch7 |
14 |
NA |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
P |
J19 |
3d |
4 |
Question-2 |
ICSI |
P |
D21 |
2a |
5 |
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 No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
F |
Ch7 |
13 |
NA |
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) 2nd 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 2nd 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
Question No. |
Institute |
Level |
Term |
QN |
M |
T-1 |
ICAI |
F |
Ch7 |
5 |
NA |
Question-1 |
ICMAI |
I |
D19 |
3b |
2 |
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.
There is no open market for the first supply of commodity ‘y’, as it is compulsorily supplied to the State Marketing Corporation. However, Gupta & Co. has the option of valuing the supply of ‘y’ at 90% of price of goods of like kind and quality sold by the State Marketing Corporation to its unrelated customers.
If the value cannot be determined by this method, it needs to be determined on the basis of the cost plus 10% mark up as per rule 30 or on the basis of Best Judgement Method as per rule 31, in that order.
Question-1 [ICMAI-I-D19-3b-2]
Determine the value of supply in the following cases:
M/s. Prithvi Starch Products, Mumbai supplied 100 tonnes of Maize Starch to its agent M/s. Ramco Agency, Ahmedabad on 10th Oct, 2019. In the delivery challan, the taxable value of the product was mentioned as Rs. 2,300 per tonne.
On the same day M/s. Ramco Agency supplied 60 kgs of Maize Starch of same kind and quality of M/s. Prithvi Starch Products at a price of Rs. 2,900 per tonne.
Further, on the same day M/s Ramco Agency has purchased on his own account 125 tonnes of Maize Starch from another independent supplier which is of the same kind and quality of M/s. Prithvi Starch Products and the value was shown as Rs. 2,700 in the Tax Invoice issued by the said independent supplier.
What is the value of taxable supply in the hands of M/s. Prithvi Starch products as per Rule 29(a) of CGST Rules, 2017?
Answer
1) Statutory Provision
i) Rule 29 - The value of supply of goods between the principal and his agent shall-
(a) be the open market value of the goods being supplied, or
at the option of the supplier, be 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, where the goods are intended for further supply by the said recipient.
(b) where the value of a supply is not determinable u/c (a), the same shall be determined u/r 30 or 31 in that order.
ii) Rule 30 - Where the value of a supply is not determinable by any of the preceding rules of this Chapter,
the value shall be 110% of the
a) cost of production or manufacture or
b) cost of acquisition of such goods or
c) cost of provision of such services.
2) Facts
Price charged by M/s. Prithvi Starch Products to its agent M/s. Ramco Agency = Rs.2,300 p.t.
Price charged by M/s. Ramco Agency of Maize Starch of same kind and quality = Rs.2,900 p.t.
Purchase Price of Maize Starch of same kind and quality by M/s Ramco Agency = Rs.2,700 p.t.
3) Comments
a) Open Marker Value is not available
b) at the option of the supplier, Value of supply
= 90% of the price charged for the supply of goods of like kind and quality by agent = Rs.2,900*0.9 = Rs.2610 p.t.
c) Value as per Rule 30 = 110% of cot of acquisition = 2,700*1.1 = 2,970
hence value of supply by M/s. Prithvi Starch Products to its agent M/s. Ramco Agency shall be lower value i.e. Rs.2610 p.t.
Value of supply = 100*2610 = Rs.2,60,100
15.4.4 Value of supply shall be based on cost i.e. 110% of Cost
Question No. |
Institute |
Level |
Term |
QN |
M |
T-1 |
ICAI |
F |
Ch7 |
7 |
NA |
Question-1 |
ICSI |
E |
J22 |
89 |
1 |
Repeated |
ICSI |
E |
J21 |
64 |
1 |
[T-1] [ICAI-F-Ch7-7]
A pharmaceutical company supplies a drug intermediate to its own unit in another State for conversion into formulations. The drug intermediate is exclusive to this company, and there is no market sale in India of this drug intermediate. Goods of like kind and quality are also not available. After conversion, the finished product is sold from the said unit itself by the company. How will the value of the supply of this drug intermediate be determined under GST law?
Answer
Since the supply is made to a distinct person, the same will be valued in accordance with rule 28 relating to valuation.
There is no open market value of the drug intermediate as also there are no like goods. Therefore, value of supply of such drug intermediate will be determined in terms of clause (c) of rule 28 i.e., by using rule 30. Thus, the value of supply of such drug intermediate will be 110% of its cost of production or manufacture. However, if the recipient unit is eligible for full ITC, the value declared in the invoice by the supplier will be deemed to be the open market value of the drug intermediate and thus, the invoice value will be the value of taxable supply.
Question-1 [ICSI-E-J22-89-1] [ICSI-E-J21-64-1]
Rule 30 of the CGST Rules, 2017, inter alia provides value of supply of goods or services or both based on cost shall be .... % of cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services.
(A) 100; (B) 10; (C) 110; (D) 120
15.5.1 Value of supply for lottery
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
E |
D20 |
73 |
1 |
Question-1A |
ICSI |
E |
D21 |
70 |
1 |
Question-1 [ICSI-E-D20-73-1]
Dhanvarsha is a lottery, authorized on 21 March, 2020 by the Rajasthan Government having face value of the ticket of Rs.500 each. The draw of the lottery is scheduled to be held on the occasion of Diwali festival in November, 2020. The value of supply of one lottery ticket under Rule 31A of the CGST Rules, 2017 shall be taken at `--------------- when the price of each of the ticket as notified in the Official Gazette by the Rajasthan Government is of Rs.385.
(A) 500; (B) 385; (C) 391; (D) 446
Answer
Higher of
(i) Rs.500/1.28 = Rs.391
(ii) Rs.385/1.28 = Rs.300
Question-1A [ICSI-E-D20-73-1] [Wrong Option given]
Rajasthan State Government runs a Lottery “Dhan Varsha” draw of which to be made on Diwali, 2021. The tickets having face value of Rs.100 each were supplied to agents for Rs.95 each whereas the price as notified in the official Gazette of Rajasthan Government was Rs.92 of each ticket. State the value of the ticket as per Rule 31A of the CGST Rules, 2017.
(A) Rs.100; (B) Rs.89; (C) Rs.92; (D) Rs.95
15.6.1.1 When foreign currency is exchanged with Indian Rs.
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
P |
D20 |
3c |
4 |
Question-1 [ICSI-P-D20-3c-4]
Ram Avtar resident of Nagpur has entered into a roll over contract approached NDMC Bank Ltd on 12-01-2020 for selling US $ 4,50,000 at the rate of Rs.75 per USD. RBI reference rate on 12-01-2020 was Rs.76 and the rate of exchange declared by CBEC for the day was Rs.76.50 per USD.
Calculate the value of taxable supply by explaining in brief the provisions of CGST Act, 2017 and rules framed thereunder.
Answer
Rule 32(2)(a), when currency is exchanged with Indian Rs.
Value of supply = (Buying/Selling Rate - RBI reference rate at that time)*No of currency
Value of supply = (76-75)*450000 = Rs.4,50,000
Note: CBEC rate has no relevance for determining the value of taxable supply of service.
15.6.1.2 When one foreign currency is exchanged with another foreign currency
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
F |
N20 |
2b |
4 |
Question-1 [ICAI-F-N20-2b(i)-2]
M/s Global Travels is providing money changer and air travel agent services to various clients. From the information provided below, you are required to calculate the value of taxable supply for the month of March 2020:
It had converted US $ 6,000 into Singapore dollar 9,000. RBI reference rate at that time was Rs.72 per US $ and for Singapore dollar, it was Rs.52
The concern has not opted to value the money change under rule 32(2)(b) of the CGST Rules, 2017.
Answer
2nd Proviso to Rule 32(2)(a)
where neither of the currencies exchanged is Indian Rupees,
Value of supply = 1% of lower of amounts the person changing the money would have received
Foreign Currency-1*RBI reference rate = Amount in Rs. = 6000*72 = Rs.4,32,000
Foreign Currency-2*RBI reference rate = Amount in Rs. = 9000*52 = Rs.4,68,000
Value of supply = 1% of Rs.4,32,000 = Rs.4,320
15.6.1.3 Exercise of another option for whole FY
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
E |
D22 |
62 |
1 |
Question-2 |
ICAI |
F |
Ch7 |
11 |
NA |
Question-3 |
ICSI |
P |
D20-O |
4A(iii) |
5 |
Question-1 [ICSI-E-D22-62-1]
As per Rule 32(2)(b) of the CGST Rules, 2017, the option to determine value in relation to supply of foreign currency, including Money Changing shall be deemed to be ......... for an amount exceeding Rs.10,00,000.
(A) Rs.5,500 + 0.1% of the gross amount of currency exchanged
(B) Rs.60,000
(C) Lower of (A) or (B)
(D) Higher of (A) or (B)
Question-2 [ICAI-F-Ch7-11]
Prada Forex Private Limited, registered in Delhi, is a money changer. It has undertaken the following purchase and sale of foreign currency:
(i) 1,000 US $ are purchased from Nandi Enterprises at the rate of Rs.74 per US $. RBI reference rate for US $ on that day is Rs.74.60
(ii) 2,000 US $ are sold to Menavati at the rate of Rs.74.50 per US$. RBI reference rate for US $ for that day is not available.
Determine the value of supply in each of the above cases in terms of rule
32(2)(a) and rule 32(2)(b).
Answer
1) As per Rue 32(2)(a)
(i) Rule 32(2)(a), when currency is exchanged with Indian Rs.
Value of supply = (Buying/Selling Rate - RBI reference rate at that time)*No of currency
Value of supply = (74.60-74)*1000 = Rs.600
(ii) 1st Proviso - If RBI reference rate is not available
Value of supply = 1% of the gross amount of Indian Rs. provided or received by money changer
Value of supply = = 2,000*74.50*1% = Rs.1,490
2) As per 3rd Proviso to Rule 32(2)(a) and Rule 32(2)(b)
a person may exercise the option to ascertain the value for a FY and such option shall not be withdrawn during the remaining part of that FY.
Cl |
Currency Exchanged |
Value of supply of foreign currency shall be |
(i) |
Upto Rs.1,00,000 |
Higher of (a) 1% of the gross amount of currency exchanged (b) Rs.250 |
(ii) |
Exceeding Rs.1,00,000 and upto Rs.10,00,000 |
Rs.1,000 + 0.50% of the (gross amount of |
(iii) |
Exceeding Rs.10,00,000 |
Lower of (a) Rs.5,500 + 0.1% of the (gross amount of (b) Rs.60,000 |
(i) Value of currency Exchanged = 1000*74 = Rs.74,000
Hence value of supply is higher of = Rs.250 or 1%*74,000 = Higher of (250, 740) = Rs.740
(ii) Value of currency Exchanged = 2000*74.50 = Rs.1,49,000
Hence value of supply = Rs.1000 + 0.50%(149000-100000) = Rs.1245
Question-3 [ICSI-P-D20-O-4A(iii)-5]
Capital Forex Private Limited, registered in Delhi, is engaged in the business as an authorized money changer and has opted to charge for the service so provided as per Rule 32(2)(b) of the CGST Rules, 2017.
It has undertaken the following transactions of purchase and sale of foreign currency on 11-03-2020 :
(i) USD 1,400 purchased from Nagesh at the rate of Rs.70 per USD. RBI reference rate on the day of transaction was Rs.70.20 per USD.
(ii) USD 2,500 sold to Mohan at the rate of Rs.69.50 per USD. RBI reference rate for the day of transaction was not available.
Explain in brief Rule 32(2)(b) of the CGST Rules, 2017 applicable as to valuation of supply in case of money changer service and also compute the value of taxable supply for both the above transactions.
Answer
As per 3rd Proviso to Rule 32(2)(a) and Rule 32(2)(b)
a person may exercise the option to ascertain the value for a FY and such option shall not be withdrawn during the remaining part of that FY.
Cl |
Currency Exchanged |
Value of supply of foreign currency shall be |
(i) |
Upto Rs.1,00,000 |
Higher of (a) 1% of the gross amount of currency exchanged (b) Rs.250 |
(ii) |
Exceeding Rs.1,00,000 and upto Rs.10,00,000 |
Rs.1,000 + 0.50% of the (gross amount of |
(iii) |
Exceeding Rs.10,00,000 |
Lower of (a) Rs.5,500 + 0.1% of the (gross amount of (b) Rs.60,000 |
(i) Value of currency Exchanged = 70*1400 = Rs.98,000
Hence value of supply is higher of = Rs.250 or 1%*98,000 = Higher of (250, 980) = Rs.980
(ii) Value of currency Exchanged = 69.50*2500 = Rs.1,73,750
Hence value of supply = Rs.1000 + 0.50%(173750-100000) = Rs.1,369
15.6.2 Value of service of booking of tickets for air travel by an air travel agent
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
F |
Ch7 |
Ill-4 |
NA |
Question-2 |
ICAI |
F |
N20 |
2b(ii) |
2 |
Question-1 [ICAI-F-Ch7-Ill-4]
UB & Sons is an air travel agent. Compute the value of supply of service made by the firm during a month with the help of following particulars furnished by it:
Particulars |
Basic fare |
Other Charges |
Taxes |
Total value of tickets |
Domestic booking |
1,00,900 |
9,510 |
4,990 |
1,15,400 |
International booking |
3,16,880 |
20,930 |
15,670 |
3.53,480 |
Answer
Computation of value of supply of services made by UB & Sons in a month
Particulars |
Basic fare |
GST rate |
GST |
Domestic booking |
1,00,900 |
5% |
5,045 |
International booking |
3,16,880 |
10% |
31,688 |
Question-2 [ICAI-F-N20-2b(ii)-2]
M/s Global Travels is providing air travel agent services to various clients. From the information provided below, you are required to calculate the value of taxable supply for the month of March 2020:
It had booked domestic ticket value of Rs.7,00,000 and international ticket value of Rs.15,00,000
Basic air fare component under both domestic and international ticket value is 70% and 60% respectively.
Answer
Computation of value of supply of services made by UB & Sons in a month
Particulars |
Ticket Value |
Basic Fare % |
Basic Fare |
GST rate |
GST |
Domestic booking |
7,00,000 |
70% |
4,90,000 |
5% |
24,500 |
International booking |
15,00,000 |
60% |
9,00,000 |
10% |
90,000 |
15.6.3 Value of service for life insurance business
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
F |
Ch7 |
Ill-5 |
NA |
Question-2 |
ICAI |
F |
M19 |
5b |
4 |
Repeated |
ICAI |
F |
Ch7 |
15 |
NA |
Question-1 [ICAI-F-Ch7-Ill-5]
Arihant Life Insurance Company Ltd. (ALICL) has charged gross premium of Rs.180 lakh from policy holders with respect to life insurance policies in the 2020-21; out of which Rs.100 lakh have been allocated for investment on behalf of the policy holders. Compute the value of supply of life insurance services provided by ALICL:
(i) if the amount allocated for investment has been intimated by ALICL to policy holders at the time of supply of service.
(ii) if the amount allocated for investment has not been intimated by ALICL to policy holders at the time of providing of service.
(iii) if the gross premium charged by ALICL from policy holders is only towards risk cover.
Note: ALICL has started its operations in the year 2020-21. Thus, the entire gross premium of Rs.180 lakh is the premium for the first year of all the policies. ALICL has not issued any single premium annuity policy.
Answer
As per rule 32(4), value of supply of services in relation to life insurance business shall be,-
(a) Policy with dual benefits of risk coverage and investment
Value = gross premium charged - amount allocated for investment, or savings on behalf of the policy holder, if such an amount is intimated to the policy holder at the time of supply of service;
(i) Amount allocated for investment intimated to policy holder at the time of supply
Value of supply = (Rs.180 lacs – Rs.100 lacs) = Rs.80 lacs
(iii) Gross premium received is only towards risk cover
Value of supply = (Rs.180 lacs – 0) = Rs.180 lacs
(b) in all other cases,
Value = 25% of the premium charged in the first year and 12.5% of the premium charged from the policy holder in subsequent years:
(ii) Amount allocated for investment not intimated to policyholders at the time of supply
Value of supply first year = 25% of Rs.180 lacs = Rs.45 lacs
Value of supply for subsequent year year = 12.5% of Rs.180 lacs = Rs.22.50 lacs
Question-2 [ICAI-F-M19-5b-4] [ICAI-F-Ch7-15]
Zindagi Life Insurance Company Limited (ZLICL) has collected premium from subscribers and it does not intimate the amount allocated for investment to subscribers at the time of collection of premium. During the month of September 2018, it has collected the following receipts:
Sl. No. |
Particulars |
Amount (Rs.) |
1. |
Premium for only risk cover |
25,00,000 |
2. |
Premium from new sub |
40,00,000 |
3. |
Renewal Premium |
80,00,000 |
4. |
Single premium on an |
1,00,00,000 |
All amounts are exclusive of tax. You are required to compute the value of supply by ZLICL in accordance with GST laws.
Answer
As per Rule 32(4), value of supply of services in relation to life insurance business shall be,-
In case of single premium annuity policies other than (a),
Value = 10% of single premium charged from the policy holder; or
In all other cases,
Value = 25% of the premium charged in the first year and 12.5% of the premium charged from the policy holder in subsequent years:
Entire premium towards risk covr
Nothing contained in this sub-rule shall apply where the entire premium paid is only towards the risk cover in life insurance
Calculation of Value of Supply
Particulars |
Amount (Rs.) |
Valuation % |
Value of Supply |
Premium for only risk cover |
25,00,000 |
100% |
25,00,000 |
Premium from new sub |
40,00,000 |
25% |
10,00,000 |
Renewal Premium |
80,00,000 |
12.5% |
10,00,000 |
Single premium on an |
1,00,00,000 |
10% |
10,00,000 |
15.6.4.1 Purchase price of repossessed goods from unregistered defaulting borrower
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICSI |
E |
D20 |
74 |
1 |
Question-1 [ICSI-E-D20-74-1]
Toyota Innova Car purchased by Babu Lal for Rs.17.50 lakh on 01.01.2019 with the financial assistance taken by way of a term loan from Bank of Baroda was repossessed on 01.01.2020 by the bank for the reason of default made by Babu Lal in making payment of outstanding amount of loan against the car of Rs.14 lakh. The repossessed car was sold by the bank on 11.01.2020 for Rs.13,75,000. The bank is liable to make payment of tax under GST for the sale of such repossessed car on the value of -----
(A) Rs.13,75,000; (B) Rs.17,50,000; (C) Rs.3,75,000; (D) Rs.14,00,000
Answer
Rule 32(5) – Value of supply of second hand goods, where no ITC has been availed on the purchase of such goods,
Value of supply = Selling price - purchase price and where the value of such supply is negative, it shall be ignored
Proviso to Rule 32(5) - Purchase value of goods repossessed from a unregistered defaulting borrower, for the purpose of recovery of a loan or debt
= purchase price of such goods by the defaulting borrower – 5% for every quarter or part thereof, between purchase date and the date of disposal by the person making such repossession
Purchase Price = Rs.17,50,000
Date of Purchase = 01.01.2019
Date of repossession = 01.01.2020
Date of disposal = 11.01.2020
Selling Price = Rs.13,75,000
Purchase Price as per Proviso to Rule 32(5) = 17,50,000 – 17,50,000*5%*5 quarter = Rs.13,12,500
Value of Supply as per Rule 32(5) = SP – PP = Rs.13,75,000 – Rs.13,12,500 = Rs.57,500
15.6.5 Value of redeemable vouchers/stamps/coupons/tokens
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
F |
Ch7 |
6 |
NA |
Question-1 [ICAI-F-Ch7-6]
Easy Coupons Ltd. sells coupons that are redeemable against specified luxury food products at retail outlets. Each coupon is sold for value of Rs.900 but is redeemable for supplies worth 1000. What is the value of supply of such coupon under GST law?
Answer
In terms of rule 32(6) relating to valuation, the value of a coupon is equal to the money value of the goods redeemable against it. Therefore, though the coupon is sold for Rs.900, its value is Rs.1000.
15.7 Value of supply of services in case of pure agent
Question No. |
Institute |
Level |
Term |
QN |
M |
Question-1 |
ICAI |
F |
Ch7 |
12 |
NA |
Question-1 [ICAI-F-Ch7-12]
Rolly Polly Manufacturers Ltd., registered in Mumbai (Maharashtra), is a manufacturer of footwear. It imports a footwear making machine from USA. Rolly Polly Manufacturers Ltd. enters into a contract with Rudra Logistics, a licensed customs broker with its office at Ahmedabad (Gujarat), to meet all the legal formalities in getting the said machine cleared from the customs station. Apart from this, Rolly Polly Manufacturers Ltd. authorises Rudra Logistics to incur, on its behalf, the expenses in relation to clearance of the imported machine from the customs station and bringing the same to the warehouse of Rolly Polly Manufacturers Ltd. which shall be reimbursed by Rolly Polly Manufacturers Ltd. to Rudra Logistics on the actual basis in addition to agency charges.
Rudra Logistics provided following details in the invoice issued by it to Rolly Manufacturers Ltd.:
SN |
Particulars |
Amount |
(i) |
Agency charges |
5,00,000 |
(ii) |
Unloading of machine at Kandla port, Gujarat |
50,000 |
(iii) |
Charges for transportation of machine from Kandla port, Gujarat to its Rudra Logistics’ godown in Ahmedabad, Gujarat |
25,000 |
(iv) |
Charges for transportation of machine from Rudra Logistics’ Ahmedabad godown to the warehouse of Rolly Polly Export Import House in Mumbai, Maharashtra |
28,000 |
(v) |
Prepared and submitted Bill of Entry and paid customs duty |
5,00,000 |
(vi) |
Dock dues paid |
50,000 |
(vii) |
Port charges paid |
50,000 |
(viii) |
Hotel Expenses |
45,000 |
(ix) |
Travelling Exp |
50,000 |
(x) |
Telephone Exp |
2,000 |
Answer
As per explanation to rule 33, a “pure agent” means a person who-
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.
The supplier needs to fulfil all the above conditions in order to qualify as a pure agent.
In the given case, Rudra Logistics has entered into a contractual agreement with recipient of supply, Rolly Polly Manufacturers Ltd., to incur, on behalf of such recipient, the expenses mentioned in S. No. (ii) to (vii) incurred in relation to clearance of the imported machine from the customs station and bringing the same to the warehouse of the recipient. Further, Rudra Logistics does not hold any title to said services and does not use them for his own interest.
Lastly, Rudra Logistics receives only the actual amount incurred to procure such services in addition to agency charges. Thus, Rudra Logistics qualifies as a pure agent.
Refer Provision of Rule 33
Since conditions (I) to (III) mentioned above are satisfied in the given case, expenses (ii) to (vii) incurred by Rudra Logistics as a pure agent of Rolly Polly Manufacturers Ltd. shall be excluded from the value of supply.
Accordingly, value of supply made by Rudra Logistics is as follows:
SN |
Particulars |
Amount |
(i) |
Agency charges |
5,00,000 |
(ii) |
Unloading of machine at Kandla port, Gujarat |
Nil |
(iii) |
Charges for transportation of machine from Kandla port, Gujarat to its Rudra Logistics’ godown in Ahmedabad, Gujarat |
Nil |
(iv) |
Charges for transportation of machine from Rudra Logistics’ Ahmedabad godown to the warehouse of Rolly Polly Export Import House in Mumbai, Maharashtra |
Nil |
(v) |
Prepared and submitted Bill of Entry and paid customs duty |
Nil |
(vi) |
Dock dues paid |
Nil |
(vii) |
Port charges paid |
Nil |
(viii) |
Hotel Expenses |
45,000 |
(ix) |
Travelling Exp |
50,000 |
(x) |
Telephone Exp |
2,000 |
|
Value of supply |
5,97,000 |
Yes, the answer would be different. If lump sum amount of Rs.13,00,000 is paid then the value of supply shall be Rs.13,00,000 and tax shall be charged on value of supply since individual cost are not given.
GST Gyaan | https://gstgyaan.in | CA Rajesh Ritolia - 9350171263