Section 2(31)

Consideration” in relation to the supply of goods or services or both includes–

Consideration = Payment in money or otherwise for supply of goods or services

(a) any payment made or to be made,

whether in money or otherwise,

in respect of, in response to, or for the inducement of, the supply

whether by the recipient or by any other person

Consideration does not include subsidy given by the CG or a SG

but shall not include any subsidy given by the CG or a SG;

Consideration = Monetary value of any act or forbearance

(b) Monetary value of any act or forbearance[i],

in respect of, in response to, or for the inducement of the supply,

whether by the recipient or by any other person

Consideration does not include subsidy given by the CG or a SG

but shall not include any subsidy given by the CG or a SG

Deposits will be treated as consideration if it applied towards consideration for supply

Provided that a deposit given in respect of the supply

shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;

Consideration does not always mean money. It can be in money or in kind.

It covers anything which might be possibly done, given or made in exchange for something else.

Ex

When there is barter of goods of services, the same activity constitutes supply as well as a consideration. When a barber cuts hair in exchange for a painting, hair cut is a supply of services by the barber. It is a consideration for the painting received.

Ex

Example : 20 [CMA-F-Ch2-Ex20] [CMA-I-Ch2-Ex20]

A Sports Club agrees to hire services of cricket player Mr. C for a consideration of Rs.2 crores. In addition to this, the agreement provides that the player shall be provided with the car valued for Rs.20 lakhs. The entire value of Rs.2.20 crores will be considered as consideration and subject to tax.

Ex

Example : 21 [CMA-F-Ch2-Ex21] [CMA-I-Ch2-Ex21]

Mr. X sells office furniture to Mr. Y on the condition that donation of Rs.10,000 is payable by Mr. Y to a trust. The amount of Rs.10,000 is paid by Mr. Y by reason of purchase of furniture. Hence, Rs.10,000 will be treated as consideration for sale of furniture.

Consideration need not always flow from the recipient of the supply. It can also be made by a third person.

Ex

Example : 19 [CMA-F-Ch2-Ex19] [CMA-I-Ch2-Ex19]

M/s L Ltd., being an authorized dealer of the TT brand, rendered services to buyer of car, but payment is made to authorized dealer by the TT Company. It is called as consideration is given by third person. Therefore, it is treated as supply of service and liable to tax in the hands of M/s L Ltd.

Consideration includes monetary value of any act or forbearance, in respect of, in response to, or for the inducement of the supply, whether by the recipient or by any other person

Example : 22 [CMA-F-Ch2-Ex22] [CMA-I-Ch2-Ex22]

M/s Dev Ltd. agreed to sell its business to M/s RN Ltd., for a consideration of Rs.50,00,000. M/s Dev Ltd. further agrees that it will not conduct same or similar business for a period of 10 years, for which M/s RN Ltd., paid Rs.20,00,000. Hence, M/s Dev Ltd., consideration is Rs.70,00,000.