Valuation Under GST law The rudiments

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Kenneth Greene
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1 Valuation

2 Valuation Under GST law The rudiments

3 The Basics Valuation and relevance Whether 10 is greater than 1,000?

4 The Basics In relevant context and time, the reply shall be yes!!!

5 Valuation Section 2 (31) of GST Model Law consideration in relation to the supply of goods and/or services to any person, includes - any payment made or to be made, - in money or otherwise, - in respect of, in response to, or for the inducement of, the supply of goods and/or services, whether by the said person or by any other person

6 Valuation - the monetary value of any act or forbearance, whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of goods and/or services, whether by the said person or by any other person

7 Valuation The monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both is also consideration only. But, in both the cases, Governments subsidy is not taxable

8 What about Earnest Money / Security Deposit / Caution Deposit / LD advance / Bid Security Money / Guarantee Money / Compliance Contingency Deposit? A deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply

9 Sec 2 (73) market value shall mean the full amount which a recipient of a supply is required to pay in order to obtain the goods or services or both of like kind and quality at or about the same time and at the same commercial level where the recipient and the supplier are not related

10 Sec 15 - Value of Goods/Service/Both = market value In line with Sec 2 (73) only Normal Transaction Value

11 Price paid or payable Unrelated parties Price is the sole consideration

12 When NTV will be affected => Amount liable to be paid by supplier, incurred by recipient but not included in Supply Value actually paid or payable

13 When NTV will be affected 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;

14 When NTV will be affected any taxes^, duties, feesω and charges levied under any statute other than the SGST Act or the CGST/UTGST/SGST ^ Stamp duty collected by residential complex developer from flat buyer for registration?

15 When NTV will be affected incidental expenses such as, commission and packing, charged by the supplier to the recipient of a supply

16 When NTV will be affected Salt on injury By including interest or late fee or penalty for delayed payment of any consideration for any supply

17 Non Government Subsidies relating to supply to be included in value!!

18 Post-supply discount which is established as per the agreement and is known at or before the time of supply and specifically linked to relevant invoices shall not be included in the transaction value ->

19 And ITC attributable to discount reversed by the recipient too

20 Who are relatives? (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;

21 Who are relatives? (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;

22 Who are relatives? (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or they are members of the same family

23 Sole agent or Sole distributor or Sole concessionaire All are relatives only!

24 Valuation Rules will have to be referred if value cannot be determined as per Sec 15 (1). i) Consideration is not wholly or partly in money ii) Supply between related parties

25 Determination of Value of Supply Rules

Value as per Determination of Value of Supply Rules shall be the open market value of such supply; if open market value is not available, be the sum total

26 Value as per Determination of Value of Supply Rules shall be the open market value of such supply; if open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time of supply

27 if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality; if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by application of rule 4 or rule 5 in that order

28 Rule 2 Value of supply of goods or services or both between distinct or related persons, other than through an agent: -> Open Market Value -> Equivalent value of such goods or service -> If not, Rule 4 or 5

29 Rule 2 If the recipient is eligible (by law) to take ITC fully, involved price is generally deemed as OMV.

30 Rule 3 Value of supply of goods made or received through an agent: Principal <-> Agent Value is OMV or 90% of Agents sales price [Optional]

31 Rule 3 If could not be determined, then Follow Rule 4 or Rule 5, ibid

32 Rule 4 Where the value of a supply of goods or services or both is not determinable by any of the preceding rules, the value shall be one 110% of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services.

33 Rule 5 If Rule 1-4 is not workable in a given situation, reasonable means consistent with the principle discussed in Sec 15 and these rules.

34 Rule 6 Specific Valuation (Mandatory Methods) Foreign exchange buying / selling dealing in INR RBI reference rates to be used to arrive at profit ; such profit is the value to be taxed. If no RBI RR is available, then 1% of gross transaction value.

35 Rule 6 If two forex currencies involved Value of lesser of two currencies converted into INR X 1%

36 Rule 6 Compound levy option can be selected well at commencement of the year Upto Rs 1 lakh -> 1% (min. Rs 250) Above 1 Lakh upto 10 lakh > 0.5% plus Rs 1000 Above 10 lakh -> 0.1% plus Rs 5000 (max. Rs 60,000)

37 Rule 6 (3) Air Travel Agent 5% of Domestic Base Price 10% of International Base Price

38 Rule 6 (4) Life Insurance Business Gross premium minus Savings/Investment In case of single premium policy, 10% in Year 1 and 12.5% subsequently In other cases 25% In case of policy with entire premium towards risk this compound levy is not applicable

39 Rule 6 (5) Buying and selling second hand goods (and no ITC claimed on purchase) Difference between buying price and selling price If negative margin, ignore

40 Rule 6 (6) Redeemable voucher/token Value of such service / goods redeemable against such voucher or token

41 Rule 6 (7) Government can notify supplies which shall have deemed value of Nil

42 Rule 7 Pure Agent! Recall Rule 5(2) of ST (DV) R 2006!!

43 Rule 8 Rate of exchange of currency, other than Indian rupees, for determination of value The rate of exchange for determination of value of taxable goods or services or both shall be the applicable reference rate for that currency as determined by the Reserve Bank of India on the date when point of taxation arises in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act

44 Goods / Services of like kind and quality Know the explanation

45 QUESTIONS?

46 THANK YOU! - CA. PRASANNA KRISHNAN. V ca_dpv@yahoo.co.in

Determination of Value of Supply

Determination of Value of Supply Rule 1. Value of supply of goods or services where the consideration is not wholly in money Where the supply of goods or services is for a consideration not wholly in money,