Valuation Rule in respect of odd Nature Supplies.
Hi Readers, in this Article we discussed valuation rule in respect of odd nature supplies such as purchase or sale of foreign currency including money changing, booking of travel by air, Life insurance business, buying or selling of second hand goods and Value of Token or voucher or coupon. Rule 32(1) of valuation value give an option to supplier to determine value of above mention transaction in the manner provided below: –
Value of services towards exchange of foreign currency [Rule 32(2)]: – A person who is engaged in purchase or sale of foreign currency including money changing may determine value of supply of services in the following manner.
A. If a currency exchange from Indian rupees or exchange to Indian rupees then value of supply shall be difference of buying and selling rate of that currency multiply by total number of currency. Reserve bank of India reference rate for that currency at that time should be taken as buying and selling rate.
Value of Supply = (Selling rate – Buying rate) x total number of currency
If reverse bank of India reference rate for a currency is not available then value shall be the one percent of the gross amount of India Rupees provided or received by person changing the money.
Value of Supply = 1 % of Gross India Rupees provided or received by person changing the money.
In case where neither of the currencies exchanged is in India Rupees i.e. One foreign exchanged by another foreign currency then value of supply be equal to one percent of the lesser of the two amounts the person changing the money would have received if converting the two currencies into INR on that day. Reference rate would be taken as provided by the Reserve Bank of India.
For Example, if a person exchanged 100 Euro by 120 Dollar. At that time the exchange rate of Euro is 77 INR and Exchange rate of Dollar is 65. The value of Euro in INR is 7,700 and Value of Dollar in INR is 7,800. Since Euro value is lesser than the Dollar Value in INR so value of supply would be INR 77 (7,700 x 1%).
If a person exercise, the above option in a financial year then such option shall not be withdrawn during the remaining part of the financial year.
B. At the option of the supplier of services, the value in relation to the supply of foreign currency, including money changing, shall be deemed to be following –
| S.No | Particular | Value of Supply |
| 1. | Gross amount upto one Lakh Rupees | 1% of Gross amount subject to minimum amount of INR 250 |
| 2. | Gross amount exceeding one Lakh Rupees and upto Ten Lakh rupee and | 1,000 + .05 % of Gross amount |
| 3. | Gross amount exceeding Ten Lakh Rupees | 5,500 + .10% of Gross amount subject to maximum amount of INR 60,000. |
Valuation rule in respect of odd nature supplies – Value of Service of booking of air Travel Ticket [Rule 32(3)]
The Value of supply in respect of Service provided by an air travel agent in relation to booking of tickets for travel by Air shall be deemed to be at the rate of 5% of the basic fare for domestic bookings and 10% of the basic fare for international passage bookings by air travel.
“basic fare” has been define under valuation rule. As per rule its means that part of the air fare on which commission earned by air travel agent.
Value of supply of Services in relation to Life Insurance business [Rule 32(4)]
A. Value of supply of services in relation to life insurance business is the gross amount charged from the policy holder. If an amount allocated for investment or saving on behalf of the policy holder then such shall be reduced from gross amount for calculating value of supply. Life Insurance business should intimated the such investment amount or saving to the policy holder at the time of supply of service.
B. In case of single premium annuity policies other than (a) then 10 % of single premium charged from the policy holder or
C. In all other cases, 25% of the premium charged from the policy holder in the first year and 12.5% of the premium charged form the policy holder in subsequent year.
Value of supply in case if policy is towards risk cover only: – nothing contained in this sub-rule shall apply where the entire premium received from policy holder is towards the for life insurance risk cover. This means that entire policy is towards risk coverage and no amount is towards investment. Therefore, entire premium will be subject to GST.
Valuation in respect of buying and selling of Second Hand Goods [Rule 32(5)]
If a person purchases taxable second-hand goods i.e. used goods and sell them as such or after minor processing which does not change the nature of the goods then value of supply shall be the difference between the selling price and the purchase price of the goods. Where the difference between the purchase price and selling price (Selling price – Purchase price) is negative then value of supply shall be zero. Registered person can apply this rule only if no ITC has been taken at the time of purchase of second hand goods.
Provided that the purchase value in respect of goods taken from a defaulting borrower for recovery of a loan or debit shall be deemed the purchase price of such goods by the defaulting borrower reduced by 5% points for every quarter or part thereof from date of purchase to date of disposal. It to be noted that default borrower should be a unregistered person under GST.
Margin Scheme shall be applied in case of used Motor Vehicles vide notification no 8/2018 – CTR dated 25.01.2018. The rate of tax for the same is 6% or 9% as mentioned in the notification. Book value is depreciated value.
For Example : – If cost of A Car is 10,00,000 and depreciated value is Rs 8,50,000. If the said car is sold for Rs 9,00,000 then the value of supply should be Rs 50,000 (9,00,000-8,50,000). Registered person has to pay GST on Rs 50,000. In case if Car is Sold Rs 7,00,000 then margin value is negative and hence there is no liability for payment of GST.
Valuation in respect of a voucher or a coupon or a token or a stamp (Excluding postage stamp) – [Rule 32(6)]
The value of voucher or coupon etc. which can be redeem against goods or services or both shall be equal to the money value of the goods or services redeemable against such token, voucher, coupon, or stamp.
For Example : If a person purchase a voucher for Rs 300 which was redeemable against purchase of a wallet worth Rs 500 from shopper’s shop. In this case, the valuation that should be taken here is the redemption value of Rs 500 instead of purchase value of Rs 200.
The value of taxable services shall be deemed to be Nil [(Rule 32(7)]
Value of taxable services provided by such class of service providers as may be notified by the Government on the recommendations of the GST Council as referred to in paragraph 2 of Schedule I between distinct persons as referred to in Section 25, where input tax credit is deemed to be NIL.
Also See, “Detail analysis in respect of valuation rule for money changer”
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