Transaction value Under GST with example
Hi Readers, in this Article we discuss the concept of Transaction value under GST with examples. As we know that GST will be charges on transaction value. If transaction value is not correctly determined then GST will not be correctly calculated and deposited which cause unnecessary further burden to the taxpayer in form of interest and penalty. Chapter IV of CGST Act has described, how to determine value on which GST would be levied. For the levy of tax, first we should determine the transaction value.
Detailed provisions of transaction value under section 15 of CGST act is as under: –
Valuation of Goods and Services – Section 15(1)
As per Section 15(1), value of supply of goods or service shall be transaction value. Transaction value is the price actually paid or payable for supply of goods or services subject to following dual condition as mention below: –
1. Supplier and receiver are not related and
2. Price is the sole consideration for the supply.
Chapter IV also explain which type of transaction to be included or excluded from transaction value.
Inclusion in the transaction Value – Section 15(2)
The Value of supply under GST shall include the following: –
| S. No | Inclusion | Description |
| 1. | Taxes under other Statute | Any taxes, duties, cesses, Fees and charges levied under any law for the time being in force other than GST Act/IGST Act, if charged separately by the supplier to the recipient to be included in transaction value. |
| For example: – As per rent contract, tenant required to pay local tax directly to the local body or to the owner of the premise. Such local tax may form part of consideration for the supply of renting service. | ||
| 2. | Any amount that supplier is liable to pay. | any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. Such amount to be included in transaction value. Also See, ” Obligation of supplier discharged by recipient – CBIC Circular 47/21/2018 dated 08-06-2018. |
| For Example: – Mr. A (Purchaser) placed an order to supply of Goods to Mr. B (Seller). As per contract Mr. B is required to deliver the goods in the premises of Mr. A. Thereafter Mr. B hire a transporter to transportation of goods. The lorry receipt of which indicated that freight is payable by receiver of goods (Mr. A). In this case, Mr B is required to make the payment to the transporter as it is the obligation of Mr. B to deliver the goods to the premises to Mr A but the payment is done by Mr A. Therefore, such payment will form part of transaction value of Goods. | ||
| 3. | Incidental Expenses | Incidental expenses including commission and packing charged by supplier to the recipient of a supply and include also anything done by supplier in respect of supply of goods or service or both at the time or before the delivery of goods or supply of services. |
| For Example: Mr. A buys dry fruit of Rs 2,000 and ask for the special packing for which Rs 500 is charged for packing. Hence the transaction value will be Rs 2,500.
Example of anything done before sale: A Company advertises for sale of installed plant and machinery to sell the same on “as is where basis is”. In this case, cost of dismantling the plant will also be included in the transaction value as the dismantling activity has nexus before sale of goods. |
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| 4. | Interest or late fees | Interest / Late Fee / Penalty for delay in payment of consideration for supply will form part of transaction value. |
| For Example: Mr X has supplied goods to Mr. Y on credit period of 30 days. The contract provides that interest will be charged at the rate of 18% for delay in making payment of supply. It specifically provides that such interest will form part of consideration and GST will be apply. | ||
| 5. | Subsidies | Subsidies directly linked to the price excluding subsidies provided by the Central Government or State Government.
The amount of subsidy shall be included in the value of supply of supplier who receives the subsidy. |
| For Example: A sell goods and get price support from its manufacturer. The subsidy so received will form part of transaction value. | ||
Exclusions form the transaction value – Section 15(3)
The value of supply does not include any discount which is given: –
1. Discount given before or at the time of supply provided such discount has been duly recorded in the invoice issued in respect of such supply and
2. Discount given after the supply has been effected if such discount is as per term of agreement entered at or before the time of such supply and specifically linked to the relevant invoices and input tax credit has been reversed by the recipient of supply as is attributable to the discount issued by the supplier.
Example for Discount Shown in Invoice
Price of a Car is Rs 5,00,000 and discount of 5% is given being the year end sale. Here the transaction value will be Rs 4,75,000 i.e after discount which will not be included in transaction value
Example for Discount not shown in Invoice
Mr A purchase an air conditioner from Mr. B for Rs 20,000 on credit for one month. After one-month Mr A gives discount of Rs 5,000 to Mr. B and B Makes payment of Rs 15,000. Here, if the discount is not known before or at the time of supply then transaction value will be Rs 20,000 but if discount is based on terms of contract or terms of payment then transaction value will be Rs 15,000 only.
Valuation Rule reference – Section 15(4): –
Section 15(4) of CGCT Act provides that where the value of supply of goods or services cannot be determined under Section 15(1), the same shall be determined in the manner as may be prescribed i.e. if value cannot be determined as per Section 15(1) then transaction value to be determined as per valuation rule.
Also See, “Valuation rule under GST with examples
Section 15 (5) of CGST Act: –
Section 15 (5) State that, notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as notified by the Government on GST council recommendations shall be determined or calculated in such manner as may be prescribed.
Related persons: –
According to section 15(1), value of supply of Goods and Services shall be transaction value if supplier and recipient of supply are not related person.
Who is Related persons: –
Persons shall be deemed to be “related persons” if –
1. They are officers or directors of one another’s businesses;
2. They are legally partners in business;
3. They are employer and employee;
4. If any person directly or indirectly owns, controls or holds in excess or equal to 25% of the outstanding voting stock or shares.
5. Directly or indirectly controls the other;
6. both are directly or indirectly controlled by a third person or both of them directly or indirectly control a third person;
7. Same family’s members
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