Term Valuation and method of calculation under GST

Meaning of term Valuation and method of calculation under GST


This post explains about Valuation and method of calculation under GST.

Valuation and method of calculation

GST would normally be payable on the ‘transaction value’. Transaction value is the price actually paid or payable for the said supply of goods and/or services between un-related parties and price is the sole consideration. The transaction value is also said to   include:

  • Taxes other than GST
  • Expenses incurred by recipient in relation to  supply
  • Incidental expenses charged at the time or before the  supply
  • Interest etc. for late payment
  • Subsides directly linked to the price excluding subsidies provided by the Central and Governments
  • As regards discounts/ incentives, it will form part of ‘transaction value’, if it is allowed after the supply is affected. However, discounts/ incentives given before or at the time of supply would be permissible as deduction from the transaction value. This would be indicated in the invoice itself.

Volume / quantity discounts would be passed on by way of credit notes.

Method of Valuation in case supply of goods or services is for a consideration not wholly in money:

Valuation Rules provides that, where the supply of goods or services is for a consideration not wholly in money, the value of supply shall be:

  1. open market value
  2. if (a) is not, then sum total of consideration in money and equivalent   thereof
  3. value of like kind and quantity
  4. cost+10%
  5. by reasonable means.

However, where there is no consideration and the receiver is eligible for credit then the value declared would be accepted as the proper value. Though not specified, it may be ideal to ensure that reasonable value is ascribed to such transaction to avoid any questions at the time of audit or otherwise.

The valuation provisions envisaged may result in disputes is the understanding as on date.  The settled case laws in Customs for market value and in Central Excise for other than sole consideration may assist in guidance in case of tainted transactions.

The information on Valuation and method of calculation under GST is detailed above.   Comment below your thoughts on Valuation and method of calculation under GST.




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