VALUE OF

SUPPLY
- C O M P R E H E N S I V E A N A LY S I S W I T H C A S E

S T U D I E S & P R A C T I C A L A P P L I C ATI O NS

P R E S E N T E D B Y:- K AR M AN YA B AJ AJ 2 2 2 0 1 5
AS H P R E E T K AU R 2 2 2 1 2 3
 INTRODUCTION
TO VALUE OF
SUPPLY
The Value of Supply under Goods and
Services Tax (GST) refers to the monetary
value assigned to a transaction involving
goods or services. It determines the tax
liability by establishing the base upon which
GST will be levied. In simple terms, it is the
price at which goods or services are sold,
adjusted for various factors such as discounts,
taxes, and incidental costs.
 SIGNIFICANCE OF VALUE OF SUPPLY
•Unified Tax System: GST replaces multiple indirect taxes (like VAT, service tax, excise duty) with a
single, unified tax, simplifying the tax structure across India.

•Improved Tax Compliance: With a digital and transparent system, GST has improved tax compliance
and reduced tax evasion by making transactions traceable.

•Reduction of Cascading Effect: GST eliminates the "tax on tax" effect (cascading effect) by allowing
input tax credits, leading to reduced overall tax burdens for businesses.

•Boosts Economic Growth: By streamlining the taxation process and reducing logistical barriers, GST
has encouraged interstate trade, improving economic efficiency.

•Simplified Taxation for Small Businesses: Under GST, small businesses enjoy a simplified tax
regime with provisions like Composition Scheme, which reduces their compliance burden.

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 WHAT IS INCLUDED IN TRANSACTION
VALUE?
Under GST, the transaction value is the primary basis for determining the value of supply. It refers to the price actually paid or payable for the goods or services,
adjusted for certain inclusions and exclusions. Here's a breakdown of what is included in the transaction value:

Inclusions in Transaction Value:

1.Price Paid or Payable: The actual price agreed upon between the supplier and the recipient for the supply of goods or services.

2.Additional Charges:

1. Packaging Costs: If packaging is a part of the transaction and is charged separately, it is included in the transaction value.

2. Freight/Shipping/Handling Charges: If the cost of transportation or delivery is borne by the buyer, it is added to the transaction value.

3. Insurance Costs: If the supplier includes insurance for the goods in the price, that amount is part of the transaction value.

4. Commissions or Brokerage: Any commission or broker fees paid by the recipient to the supplier related to the supply.

3.Incidental Charges:

1. Charges such as installation, assembly, or maintenance that form part of the supply and are agreed upon between the supplier and the recipient.

4.Interest, Penalty, or Late Fees: Any additional amounts paid by the recipient for delayed payments, interest, or penalties related to the supply.

5.Any Taxes, Duties, Fees, or Charges (excluding GST):

1. Customs duties or any other taxes/duties/levies (other than GST) that are part of the cost of the goods or services are included in the transaction value.
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SUBSIDIES DIRECTLY LINKED TO PRICE

• Excludes Government Subsidies* but includes other financial assistance affecting

Case Study: Inclusion of Additional Charges

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 EXCLUSIONS FROM VALUE OF SUPPLY
Discounts (As per Section 15(3)) -

Pre-supply Discounts: - Must be mentioned in the invoice and adjusted at the time of supply.

Post-supply Discounts: - Allowed only if agreed upon before supply & linked to specific terms.

- GST itself is not included in transaction value.

Case Study:
Impact of Discount on GST Valuation Scenario: - XYZ Ltd. sells goods worth ₹1,00,000 but offers a
10% discount at the time of sale.

The invoice records a net value of ₹90,000.

GST is charged on ₹90,000, NOT ₹1,00,000.

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SUPPLY INVOLVING NON-MONETARY
CONSIDERATION

Case Study: Barter Transaction

- A retailer supplies laptops worth ₹2,00,000 in exchange for office furniture worth
₹1,80,000 + ₹20,000 in cash. - *Valuation:* ₹2,00,000 (OMV of laptops). - *GST is
calculated on ₹2,00,000, NOT ₹1,80,000.*

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CHALLENGES IN VALUATION OF SUPPLY
UNDER GST
COMPLEXITY IN DETERMIN ING TRANSAC TION VALUE : IDENTIF Y ING ALL APPLICABLE
COSTS (E.G., PACKAGING, FREIGHT, INSURANCE) AND ENSURING THEY AR E CORRECTLY
INCLUDED IN THE TRANSACTION VALUE.

RELATED PARTY TRANSACTIO NS: ENSURING FAIR MARKET VALUE IS APPLIED WHEN
TRANSACTIONS OCCUR BETWEEN RELATED PARTIES TO AVOID MANIPUL ATION .

DISCOUNTS AND INCENTIVES : HANDLING POST -SUPPLY DISCOUNTS OR VOLUME -BASED

BUNDLED SUPPLIES : DIFFICULTY IN SEPARATING THE VALUE OF GOODS AND SERVICES IN

CROSS-BORDER AND IMPORT/EXP ORT ISSUES: DETERMINING THE VALUE FOR IMPORTED
GOODS AND SERVICES, INCLUDING FREIGHT, DUTIES, AND TAXES.

COMPLEX TAX RATES: CORRECTLY APPLYING DIFFERENT GST RATES FOR VARIOUS GOODS
AND SERVICES CAN BE CHALLENGING, ESPECIAL LY FOR MIXED OR BUNDLED SUPPLIES.
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 RESIDUAL VALUATION (RULE 31) -
USED WHEN: NO OTHER METHOD
APPLIES.
EXAMPLE: - A COMPANY SUPPLIES
CUSTOMIZED SOFTWARE
SOLUTIONS. - NO COMPARABLE
MARKET PRICE EXISTS. - GST
OFFICER DETERMINES VALUATION
BASED ON SIMILAR IT SERVICES.
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 CONCLUSION
The value of supply under GST is a critical element in determining the tax
liability of a transaction. It establishes the base for calculating the GST that
businesses must collect and remit to tax authorities. Understanding and
accurately determining the transaction value, including additional costs like
packaging, shipping, and commissions, is essential for businesses to ensure
compliance with GST laws.
While GST simplifies the indirect tax structure, it also introduces challenges,
especially in cases of related party transactions, bundled supplies, and cross-
border transactions. These complexities require businesses to maintain
accurate records, implement robust systems for valuation, and stay updated
on GST provisions.
Ultimately, correct valuation of supply ensures fair taxation, promotes
transparency, and allows businesses to take advantage of input tax credits,
contributing to smoother operations and greater efficiency in the GST system.
Compliance with these provisions is key to avoiding penalties, tax disputes,
and ensuring the integrity of the supply chain under the GST regime.

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THANK YOU!

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