I.
Valuation under CGST Act (Section 15)
• Transaction Value: The primary basis for valuation is the transaction value, which is the price actually
paid or payable for the supply of goods or services.
• Conditions for Acceptance of Transaction Value:
o Price is the sole consideration.
o Supplier and recipient are not related persons.
• Inclusions in Transaction Value:
o Any incidental or ancillary charges related to the supply.
o Any taxes, other than GST and compensation cess.
o Interest on delayed payment of consideration for a taxable supply.
o Third-party payments made by the recipient on behalf of the supplier (if it was the supplier's
obligation).
• Exclusions from Transaction Value:
o TCS (Tax Collected at Source) under the Income Tax Act 1961.
o Government subsidies directly linked to the supply.
o Pre-supply discounts, if recorded on the invoice.
o Post-supply discounts, if:
▪ Agreed upon on or before the time of supply.
▪ Related to specific invoices.
▪ Recipient reverses the input tax credit.
o Moulds, tools, or dies used by manufacturers are not considered part of the transaction
value under customs valuation rules if they are not directly sold or transferred (as per
CBIC circular).
o No claim bonus (NCB) provided by insurance companies is not included in the assessable
value for Goods and Services Tax (GST) purposes (as per CBIC circular).
II. Valuation Rules
• Rule 27: Consideration Not Wholly in Money
o Order of Preference:
1. Open market value.
2. Monetary value of non-monetary consideration plus monetary consideration.
3. Value of like kind or quality.
4. Cost plus 10%.
5. Reasonable means (for services, can be applied before cost plus 10%).
• Rule 28
o Order of Preference:
1. Open market value.
2. Price of like kind and quality goods.
3. Cost plus 10%.
4. Reasonable means (for services, can be applied before cost plus 10%).
o Key Points:
▪ If the recipient is eligible for full ITC, the invoice price will be accepted as open market
value.
▪ If the recipient sells the goods to an unrelated person, 90% of the recipient's selling price
can be used as the value (at the supplier's option).
• Rule 29: Valuation for Agents (Schedule I)
o Applies to agents who bill in their own name to the consumer.
o Order of Preference for valuation for the principal:
1. Open market value.
2. 90% of the price charged by the agent to the customer.
3. Cost plus 10%.
4. Reasonable means.
• Rule 30: Cost plus 10%.
• Rule 31: Reasonable means.
• Rule 31A: Lottery, Betting, Gambling, Horse Racing
o Lottery: Face value or price notified divided by 128 and multiplied by 100, whichever is higher.
o Betting, Gambling, Horse Racing: 100% of the bet value.
III. Special Valuation Rules (Rule 32)
• Air Travel Agents:
o Domestic bookings: 5% of basic fare.
o International bookings: 10% of basic fare.
o Note: Basic fare is the fare on which commission is typically paid.
• Money Changing Services:
o If RBI exchange rate is available: Difference between RBI rate and transaction rate multiplied by
1%.
o If RBI rate is not available: 1% of the transaction value.
o If none of the currencies is INR: Convert both currencies to INR, take the lower value and multiply
it by 1%.
o Slab Rate Option:
▪ 0 to 1 lakh: 1% (minimum).
▪ 1 lakh to 10 lakh: 1000 + 0.5% of the amount exceeding 1 lakh.
▪ Above 10 lakh: 5500 + 0.1% of the amount exceeding 10 lakh (maximum 60,000).
• Life Insurance Sector:
o Risk-based policies: Entire premium is liable.
o Investment-based policies:
▪ If breakup is available: Only risk portion is liable.
▪ If breakup is not available:
▪ First year premium: 25% will be the value.
▪ Subsequent year premium: 12.5% will be the value.
o Single premium annuity policy: 10% of the premium charged.
• Second Hand Goods: Value is sale price minus purchase price (margin).
• Repossessed Goods:
o Value is sale price minus purchase price.
o Purchase price is the original buyer's purchase price minus 5% per quarter or part thereof.
o If the result is negative, it is taken as zero.
o ITC on such goods is not allowed.
• Vouchers: Valued at redemption value.
IV. Pure Agent (Rule 33)
• If expenses are incurred by the supplier and used by the supplier, then they are added to the value and
are liable to GST.
• If the supplier acts as a pure agent, GST will not apply on reimbursement if:
o The supplier incurs expenses on behalf of the recipient.
o The supplier only charges the actual expenses.
o The expenses are shown separately on the invoice.
o The expenses are in addition to the services the supplier provides on his own account.
o Example: ROC filing charges by a CA, where the filing is in the name of the company.
V. Foreign Currency Transactions (Rule 34)
• Goods: Time of supply date and the CBIC notified rate.
• Services: Time of supply for services as the date, and the rate as per generally accepted accounting
principles.
VI. Consideration Received Without GST (Rule 35)
• Amount received is treated as inclusive of GST.
VII. Circulars (Airlines)
• User Development Fee (UDF) and Passenger Service Fee (PSF):
o Airlines act as a pure agent for collection.
o The liability to pay GST on UDF and PSF is on the airport operators.
o Airlines charge collection charges/commission to the airport operators.
o Airport operators are eligible for Input Tax Credit (ITC) on this transaction.
