The Central Goods and Services Tax Act, 2017
CHAPTER IV: TIME AND VALUE OF SUPPLY
Section 15: Value Of Taxable Supply
Bare Act
(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
(2) The value of supply shall include -
- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;
- (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;
- (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;
- (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and
- (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and the State Governments. Explanation - For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.
(3) The value of the supply shall not include any discount which is given -
- (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
- (b) after the supply has been effected, if -
- (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
- (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.
(4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.
(5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.
Explanation - For the purposes of this Act, -
- (a) persons shall be deemed to be related persons if -
- (i) such persons are officers or directors of one another's businesses;
- (ii) such persons are legally recognised partners in business;
- (iii) such persons are employer and employee;
- (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them;
- (v) one of them directly or indirectly controls the other;
- (vi) both of them are directly or indirectly controlled by a third person;
- (vii) together they directly or indirectly control a third person; or
- (viii) they are members of the same family;
- (b) the term "person" also includes legal persons;
- (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.
Simplified Act
1. Basic Rule for Calculating the Cost of Goods or Services:
The cost of goods or services is usually the actual amount paid for them. This is true when the buyer and seller are not related and the price is the only thing being considered.
2. What is Included in the Cost:
The cost should include:
- Any taxes or fees not part of this GST law, if they're listed separately on the bill;
- Costs that should be paid by the seller but are paid by the buyer instead;
- Extra charges like packing or commission, and any services provided before or during delivery;
- Interest or fees for paying late;
- Subsidies that affect the price, except for those from the government.
Subsidies received by the seller should be added to the cost of the goods or services.
3. Discounts That Reduce the Cost:
Discounts can reduce the cost if:
- They are given before or when the goods or services… Read the complete text with KanoonGPT Pro.
Explanation using examples
Example Scenario:
Imagine a company, ABC Pvt. Ltd., sells goods to an independent retailer, XYZ Stores, for INR 100,000. This is the price both parties agreed upon, and neither party has any control or significant influence over the other. The transaction value of INR 100,000 would be considered the value of the supply of goods under Section 15(1) of the CGST Act, 2017, as the supplier and recipient are not related, and the price is the sole consideration for the supply.
Now, let's say ABC Pvt. Ltd. also charges XYZ Stores an additional INR 5,000 for packaging and INR 2,000 as a shipping fee. Moreover, XYZ Stores agrees to pay a late fee of INR 500 per day for any delayed payment. According to Section 15(2)(c) and (d), the value of the supply will now include these incidental expenses and the late fee, making the total value INR 107,000 plus any applicable late fees if the payment is delayed.
However, if ABC Pvt. Ltd. offers a discount of INR 10,000 on the condition that XYZ Stores pays within 10 days, and this discount is recorded in the invoice, then as per Section 15(3)(a), the value of the supply would be INR 97,000 (assuming payment is made within the discount period).
