Value of taxable supply Important Questions with Answers
Is there any specific valuation mechanism provided for composite supplies and mixed supplies? No. Section 15 and the rules prescribed under this Section are common for supply of goods and supply of services. The provisions of valuation and the rules would apply to composite supplies and mixed supplies equally Will the valuation rules provided in Section 15 apply to IGST payable on import of goods? No. Customs Law will be applicable for valuation of imported goods.
Is reference to Valuation Rules required in all cases?
No. Reference to Valuation Rules is required only when the supply is between related persons (including different registrations of the same PAN and principal agent supplies), or where the consideration payable is not wholly in money. However, in specific cases where the categories of goods and services are notified in this regard (such as money-changing), the valuation rules must be referred to, irrespective of the fact that the supplier and recipient are unrelated and price is the sole consideration. If related persons transact at arm’s length price, can the valuation still be questioned? The law mandates a reference to valuation rules where the supply is between related persons. However, since the supply is at “arm’s length price”, the fact that the price assigned to the transaction is an ‘open market value’ should be established. Will discounts given to customers be allowed as deduction from transaction value? Yes, the following two types of discounts would be excluded from transaction value:
Discount at the time of Sale – Allowed as a deduction provided if the discount is recorded on the face of invoice.
Post-supply Discount – If such discount is based on the arrangement entered into before or at the time of supply, AND where the same can be linked to relevant invoices, then the same is allowed as a discount on the condition that the recipient reverses the tax credit related to such discount availed earlier. Will GST be applicable on any interest charged for payment after the credit period? Interest, Penalty or Late fee charged from the customer would also be liable to GST. However, the law provides that the GST liability on such values can be paid only on receiving such additional amounts. Are subsidies received from Private Enterprises on procurement of eco-friendly capital goods required to be included in the transaction value? Subsidies directly linked to the price of the supply are to be included in the transaction value, where such subsidies are not provided by the Central/ State Governments. Where it can be established that the price of the supply is not directly linked to the subsidy given on capital goods, the same is not required to be included. Will the Customs duty paid by Customs House Agent on behalf of the client also be required to be included in the transaction value? Presently, under the Service tax law, the aforementioned expenses are treated as reimbursements as ‘pure agent’ and are hence, not liable to service tax. Similar treatment exists in case of pure agents under the GST law as well, where the expenditure/ costs are incurred by the supplier acting as a pure agent of the recipient, on fulfilment of prescribed conditions. Recommended Articles
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