Value of Supply-Valuation Rules

 Normally value of supply is to be determined as per Transaction Value Method

(TV Method)
 However, TV Method is based on two conditions
Hence , if any of the two conditions is not fulfilled then valuation is to be done as
per prescribed rules
Goods and Service Tax (CGST) Rules, 2017-Detemination of value of
supply. (Listed as under)

Rule No. Rule Description

Rule 27 Value of supply of goods or services where the consideration is not wholly in
money
Rule 28 Value of supply of goods or services or both between distinct or related persons,
other than through an agent
Rule No. Rule Description
Rule 29 Value of supply of goods made or received through an agent
Rule 30 Value of supply of goods or services or both based on cost
Rule 31 Residual method for determination of value of supply of goods or services or both
Rule 32 Determination of value in respect of certain supplies:-
(i) Purchase or sale of foreign currency, including money changing
(ii) Booking of tickets for air travel by an air travel agent
(iii) Life Insurance business
(iv) Value of supply of second hand goods
(v) Valuation of redeemable token, or a voucher, or a coupon, or a stamp (other than
postage stamp)
(vi) Value of taxable services provided by a notified class of service providers as
referred in paragraph 2 of Schedule I
Rule 33 Value of supply of services in case of pure agent

Rule 34 Rate of exchange of currency, other than Indian rupees, for determination of
value
Rule 35 Tax calculation formula
Rule 27- Value of supply of goods or services where the consideration is not
wholly in money

Situation Valuation criteria

(a) The open market value, if  The full value in money, excluding the
available GST payable by a person in a transaction
Parties are not related and price is the
sole consideration
Such supply is made at the same time
when the supply being valued is made
(b) If the open market value is not Monetary consideration + money value of
available the non monetary consideration
(c) If (a) and (b) are not applicable Value of supply of like kind and quality*.
(d) IF (a),(b) and (c) not applicable Application of rule no 30 and 31 in that
order
* Any other supply made under similar circumstances that, in respect of the
characteristics, quality, quantity, functional components, materials, and the
reputation of the goods or services or both is the same as, or closely or
substantially resembles to the supply being made
Examples (Rule 27)
(1) Where a new phone is supplied for twenty thousand rupees along
with the exchange of an old phone and if the price of the new phone
without exchange is twenty four thousand rupees, the open market
value of the new phone is twenty four thousand rupees.

(2) Where a laptop is supplied for forty thousand rupees along with the
barter of a printer that is manufactured by the recipient and the value
of the printer known at the time of supply is four thousand rupees but
the open market value of the laptop is not known, the value of the
supply of the laptop is forty four thousand rupees.
Rule 28- Value of supply of goods or services or both between
distinct or related persons, other than through an agent

Situation Valuation criteria

(a) The open market value, if -
available
(b) If the open market value The value of supply of like kind and quality
is not available
(c) If (a) and (b) not Application of rule no 30 and 31 in that order
applicable

Option
Where the goods are intended for further supply as such by the recipient the
value shall, at the option of the supplier, be an amount equivalent to ninety
percent of the price charged for the supply of goods of like kind and quality by
the recipient from his unrelated customer
Example-
1. Mr X is owner of two plants P1 and P2.Both the plants are in same type
of operations.P1 received an order to provide service for Rs 300000
which P1 shifted to P2 in Rs 20000.1000 hours are required to complete
this job. If P2 gets this order from any other person then it will charge
Rs 250 per hour. Find Value of service ?
Solution:-Decide on the basis of market value.
2. Z Ltd. of Ambala supplied 400 meters of cloth in Rs 40000 to its branch
M Ltd. at Ludhiana. M Ltd is selling further after completing some
process on it Z Ltd is not manufacturing such cloth for any other
customer. However such cloth is available in Amritsar @ Rs 90 per
meter
Rule 29-Value of supply of goods made or received through an
agent
Situation
(a) The open market value
OR 90 % of the price
charged for the supply of
goods of like kind and
quality by the recipient to
his unrelated customer
where the goods are
intended for further
supply by the said
recipient
(b) If (a) is not applicable
Valuation criteria
A principal supplies groundnut to his agent and the
agent is supplying groundnuts of like kind and
quality in subsequent supplies at a price of rupees
5000 per quintal on the day of the supply. Another
independent supplier is supplying groundnuts of like
kind and quality to the said agent at the price of
rupees 4550 per quintal. The value of the supply
made by the principal shall be rupees 4550 per
quintal (market value) OR where he exercises the
option, the value shall be 90 per cent. of rupees
5000 i.e., rupees 4500 per quintal.
Application of rule no 30 and 31 in that order
Rule 30- Value of supply of goods or services or both based on
cost
cost of supply plus 10%.
Rule 31- Residual method for determination of value of supply
of goods or services or both
determined using reasonable means i.e. Best Judgement method.
Rule 32- Determination of value in respect of certain supplies

(i) Purchase or sale of foreign currency, including money

changing
Option 1
Case I- One of the currencies Case II- Neither of
exchanged is Indian Rupees Currency exchanged is
Indian Rupees
(Currency buying/selling rate Less I-Convert both the currencies
RBI reference rate )* x units of in Indian rupees at RBI
foreign currency reference rate
If RBI reference rate is not available II-Calculate 1% of the
converted amount in rupees
1% of the gross amount of Indian III-Value will be lesser of
Rupees provided or received by the two amounts
person changing the money
 Option-2
Up to Rs 100000-1% of the gross amount of currency exchanged
(minimum amount of Rs 250)

Rupees100000 to Rupees 1000000- Rupees 1000 plus 1/2% of the

gross amount of currency exchanged above Rs 100000

Above Rupees 1000000-Rupees 5500 plus 1/10% of the gross

amount of currency exchanged above Rupees 1000000 (maximum
amount Rupees 60000)
(ii) Booking of tickets for air travel by an air travel agent
Domestic bookings- 5% of the basic fare

International bookings- 10% of the basic fare

 (iii) Life Insurance business#
Dual benefit policy- Premium charged less amount allocated for investment or
savings if such an amount is intimated to the policy holder at the time issue of
policy.
Example- Premium amount per annum is Rs 20000.Police covers risk and investment.
Amount of investment is 60% in the premium
Value 20000-12000= 8000

Single premium annuity policies -10% of single premium charged e.g. Value
will be Rs 2000 in above example

All other cases-First year 25% of the premium charged and 12.5% in subsequent
years e.g. Value in 1st year 5000 and 2500 in subsequent years.
#Premium on policy up to Rs 200000 is exempted from GST. Insurance under PMJDY
exempted from GST
(iv) Value of supply of second hand goods
The difference between the selling price and the purchase price
provided no input tax credit has been availed. Where the value of such
supply is negative it shall be ignored.
Example- A dealer Purchased a second hand car for Rs 100000 and sold it for Rs
175000.Value for GST is Rs 75000 (175000-100000)

Goods repossessed from a defaulting borrower not registered- The

purchase price of such goods reduced by 5% for every quarter or part
thereof, between the date of purchase and the date of disposal by the
person making such repossession
Example- A dealer sold a car on HP basis for Rs 300000 on September 2019 but
repossessed it due to default in payment by buyer in June 2020. Value of car will be
Rs255000 (85 %) ,5 % reduction for each quarter up to June 20 from Sep 19
Goods repossessed from a defaulting borrower Who is registered-
Supply value of such goods without any reduction from purchase
value

(v) Valuation of redeemable token, or a voucher, or a coupon, or

a stamp (other than postage stamp)
The money value redeemable against such token, voucher, coupon, or
stamp.

(vi) Value of taxable services provided by a notified class of

service providers as referred in paragraph 2 of Schedule I
NIL, where input tax credit is available
Rule 33- Value of supply of services in case of pure agent

The expenditure or costs incurred by a supplier as a pure agent of

the recipient of supply shall be excluded from the value of supply
Example-
Corporate services firm A is engaged to handle the legal work pertaining
to the incorporation of Company B. Other than its service fees, A also
recovers from B, registration fee and approval fee for the name of the
company paid to the Registrar of Companies. The fees charged by the
Registrar of Companies for the registration and approval of the name are
compulsorily levied on B. A is merely acting as a pure agent in the
payment of those fees. Therefore, A’s recovery of such expenses is a
disbursement and not part of the value of supply made by A to B.
Rule 34- Rate of exchange of currency, other than Indian rupees,
for determination of value
Taxable goods- The applicable rate of exchange as notified by the
Board under section 14 of the Customs Act,1962 for the date of time
of supply.
Taxable services- The applicable rate of exchange determined as
per the GAAP for the date of time of supply.
Rule 35- Formula to calculate tax when value is inclusive of GST
Tax amount = (Value inclusive of taxes X GST tax rate in % )
(100++ sum of GST tax rates in %)
Value including GST (18%) is Rs 118000
Tax =118000x18
(100+18) 18000