Value of Goods and Services Determined under GST

By Registrationwala

13th May 2017


GST Law is the greatest indirect tax reforms in India after Independence which will affect everyone, from the business fraternity to a common citizen. The estimation of the considerable number of goods and services devoured in an economy is touched base at in light of specific measurements. In the present tax regime in India, this value is computed in various ways.

Valuation of Goods and Services

Current regime

Currently taxes are calculated on the value of goods/services-


Value of goods/services


Transaction value of goods or MRP


Sale Value

Service tax

Taxable value of service rendered

Valuation under GST

GST will be charged on the 'transaction value'. Transaction value is the cost really paid (or payable) for the supply of products/administrations between un-related parties (i.e., cost is the sole consideration)

The estimation of supply under GST might include:

Any taxes, duties, cess, fees and charges required under any act, with the exception of GST. GST Compensation Cess will be rejected if charged independently by the provider.

Any sum that the provider is liable to pay which has been caused by the beneficiary and is excluded in the price.

The value will incorporate all incidental costs in connection to sale, for example, packing, commission and so forth.

Subsidies connected to supply, aside from Government subsidies will be incorporated.

Interest/late fee/penalty for deferred payment of consideration will be incorporated

Valuation norms under GST

The value taken for computation of GST is the cost really paid by beneficiary of goods/services to the provider. This might be taken if and just if:

  • The provider and the beneficiary of the supply are not related
  • The cost is the sole consideration for the supply

The value therefore related to above formula is commonly known as transaction value under area 15(1) of the model GST law. There are particular considerations to be made in ascertaining transaction value as given under area 15(2) and a few exclusions given under segment 15(3) of the act. Section 15(4) gives that where the estimation of the supply of products or services can't be resolved under sub-section (1), the same should be resolved in such way as may be prescribed.

Disregard of Value under section 15(1)

At the point when the proper officer has a reason to question reality or precision of the value announced in connection to any goods or services, he may request that the provider to furnish further information , including reports or other confirmation and if, subsequent to getting such additional information, or without any reaction from such provider, the proper officer still has  uncertainty about reality or exactness of the value so proclaimed, it might be regarded that the transaction value of such products and additionally benefits can't be resolved under the provisions of sub-rule (1) of rule 3. [Rule 7(1)]

Along these lines, only the reason to question on truth or precision of the value is adequate enough to dismiss the transaction value. The existence of following ingredients is sufficient to stir presence of reasons of uncertainty on proper officer to reject transaction value and consider the valuation rules:

The significantly higher value at which goods as well as services of the like kind or amount are provided

The fundamentally lower or higher value of the supply of products or services contrasted with the marker value

Mis-declaration of parameters, for example, description, amount, quality, year of manufacture or production

Methods of determination of value-

(1) The "transaction value" might be the value decided in financial terms.

(2) Where the supply comprises of both taxable and non-taxable supply, the taxable supply shall be esteemed to be for such part of the monetary consideration in its present condition attributable thereto.

(3) The transaction value should be acknowledged even where the provider and recipient of supply are connected, given that the relationship has not impacted the cost.

(4) Where merchandise are transferred from—

(a) One place of business to somewhere else of a similar business,

(b) The principal to an agent or from an agent to the principal, regardless of whether arranged in a same State, the value of such supply should be the transaction value

Value of Supply by Comparison

Where the value of a supply can't be resolved, the value might be decided on the basis of the transaction value of products or services of like kind and, quality provided at or about a similar time to different clients, adjusted in accordance with the provisions

In deciding the value of goods as well as services, the proper officer might make such alterations as appear to him reasonable, contemplating the significant components, including-

(a) Distinction in the dates of supply,

(b) Contrast in commercial levels and quality levels,

(c) Contrast in structure, quality and design between the products or services being valued and the merchandise and services with which they are analyzed,

(d) Distinction in freight and insurance charges relying upon the place of supply.

Computed Value Method

On the off chance that the value can't be determined, it should be based on computed value which might incorporate the accompanying:-

(a) The cost of creation, manufacturing or handling of the merchandise or, the cost of arrangement of the services;

(b) Charges, assuming any, for the design or brand;

(c) A sum towards profit and general costs equivalent to that normally reflected in supply of merchandise and services of an indistinguishable class or kind as the goods and/or services being valued which are made by different providers.

Residual Method

Where the estimation of the merchandise and services can't be decided the value might be resolved utilizing reasonable means steady with the standards and general principles of these rules.

Discounts determined under GST

The effect of discount on transaction value is as following

Type of discount

Effect on transaction value

If the discount is given before or at the time of supply, and is recorded in the invoice

Can be claimed as deduction from transaction value

If the rebate is given after supply, but agreed upon previously or at the time of supply, and can be specifically connected to relevant invoices

Can be claimed as deduction from transaction value

If the discount is given after supply, and not known at the time of supply

Cannot be claimed as deduction from transaction value

Effect of various charges on transaction value is as following

Charges/expenses related to supply

Effect on transaction value

Incidental expenses such as commission and packing

Included in transaction value

Interest/late fee/penalty charged by supplier for delayed payment

Included in transaction value

Subsidies excluding those provided by the Central and State governments

Included in transaction value

Any tax other than GST

Included in transaction value

Any amount payable by supplier, but incurred by receiver

Included in transaction value

It is likely that GST (Goods and Services Tax) will bring changes in the tax situation in the nation. The different parts of product pricing, valuation of merchandise and enterprises, and others will encounter critical change as the tax system is simplified.


Value of Goods and Services Determined under GST