SEMINAR ON GST LAW VALUATION

1. SEMINAR ON GST LAW VALUATION BY CA JANAK VAGHANI Janak.vaghani1@gmail.com 09324680306

2. VALUATION • GST is payable on value of supply either of goods or services • No Specific Provision in charging provision section 7. • Section 7 reads as under;- • There shall be levied a tax called the Central/State Goods and Services Tax (CGST/SGST) on all intra-State supplies of goods and/or services at the rate specified in the Schedule . . . to this Act and collected in such manner as may be prescribed.

3. Transaction Value- S.15(1) • Section 15 (1) provides for valuation without specifically providing for the purpose of levy of tax. • It is understood that it is for levy of tax. • Sub section (1)Provides that the value of a supply of goods and/or services shall be the transaction value, • that is the price actually paid or payable for the said supply of goods and/or services • where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply, • Where the supplier and the recipient of the supply are not related and the price is the sole consideration.

4. Inclusions S.15(2) The transaction value under sub-section(1) shall include: • 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, (b) the value, apportioned as appropriate, of such goods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued,

5. Inclusions S.15(2) • royalties and licence fees as a condition of the said supply • any taxes, duties, fees and charges levied under any statute other than the SGST Act or the CGST Act or the IGST Act;

6. Inclusions S.15(2) • Any incidental expenses, such as, commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services, at the time of, or before delivery of the goods or, as the case may be, supply of the services; (f) subsidies provided in any form or manner, linked to the supply;

7. Inclusions S.15(2) (g) any reimbursable expenditure or cost incurred by or on behalf of the supplier and charged in relation to the supply of goods and/or services; (h) any discount or incentive that may be allowed after the supply has been effected. However, as per proviso the 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.

8. Exclusions-Section 15(3) • The Transaction Value shall not include any discount allowed, • Before or at the time of supply, • Provided in the normal trade practice and • Recorded in invoice.

9. Reference to Valuation-Section 15(4). • In following cases valuation of supply shall be determined as per valuation rules;- • The Consideration is not money in part or whole, (Surprisingly Supply without consideration is missing.) • Supplier and recipient is related, • There is reason to doubt truth or accuracy of transaction value, • Business transactions undertaken by Pure Agent, Money Changer, Travel Agent, Insurer, Air Travel Agent and Distributor or Selling Agent of Lottery.

10. Method of Valuations- GST Valuation -Rules 3 to 6. • GST Valuation rules provides following method of valuations;- • 1. Transaction value-R 3(2) • 2.Comparison-R.4 • 3.Computd Value Method-R.5 • Residual Method-R.6

11. Transaction Value-R.3 • General rule by default is transaction value. • Which shall be determined in monetary terms • It shall be accepted even in cases of transactions with related persons provided that the relationship has not influenced the price. • In case of composite supply of taxable and non taxable the taxable value shall be attributable to taxable supply. • Even in case of supply of goods from one place to another place of business or to agent whether in same State or not transaction value shall be the value of such supply. • Rules 4 to 6 shall apply in sequentially to supplies covered by section 15(4).

12. Valuation by Comparison-Rule 4. • To apply when value can not be determined under rule 3, • The value shall be determined on the basis of the transaction value of like kind and quality supplied to others subject to adjustments, • For difference in date of supply, • Difference in commercial and quantity levels, • Difference in comparison , quality and design, • Difference in freight and insurance charges depending upon place of supply.

13. Computation Value-Rule 5 • Applies only when value can not be determined as per rule 3 and 4 , computed by including following;- • Cost of production, manufacture, or processing of the goods or provision of service, • Charges, if any, for design or brand and • Usual general expenses and profit which are made by other suppliers.

14. Residual Method-Rule-6 • Apply when value can not be determined as per rule 5, • Value shall be determined by using any reasonable means consistent with the principles and general provisions of these rules.

15. Rejection of Declared value-Rule 7 • Apply when the Proper Officer has reason to doubt truth or accuracy of the declared value, • May ask supplier to furnish details, • Still he reasonable doubts about truth and accuracy of declared value, • Upon hearing the value shall be determined as per rules 4 to 6.

16. Reasons for Truth and Accuracy of Declared Value- Rule 7(1) (b) • Following not limited there to shall include reasons to doubt truth and accuracy of declared value;- • Significant higher value in comparable transactions assessed, • Significant lower value, • Any misdeclarations of goods/ services such as description, quality, quantity, year of manufacture or production. The rule itself does not provide valuation but provides mechanism and procedure for rejection of declared value.

17. Valuation in Other Cases-Rule 8 • 1. Pure Agent, value shall exclude expenses incurred upon behalf of recipient of services upon fulfilling following conditions;- • Acts as pure agent when he makes payment to third party; • Receipt of goods or service as pure agent; • The recipient is liable to make payment to third party; • Authorisation by recipient to service provider to make payment to third party;

18. Valuation in Other Cases-Rule 8 • Knowledge by recipient that service or goods shall be procured from third party; • Payment is indicated separately in invoice; • Recovery on actual basis; and • Procurement of goods or services is in addition to service provided by the Supplier on his own account.

19. Valuation in Other Cases-Rule 8 • Pure Agent is defined in Explanation means a person who;- • Enters contractual agreement as pure agent to incur expenses or costs in providing taxable service; • No intention to hold title to goods / or services; • Does not use it; • Receive only the actual amount incurred

20. Valuation in Other Cases-Rule 8 • 2. Money Changer • Value for providing service for sale purchase of foreign currency including money changing shall be determined as under;- • For a currency when exchanged from or to Indian Rupees – the value shall be difference in the buying or selling rate and the RBI reference rate for that currency multiplied by the total unit of currency

21. Valuation in Other Cases-Rule 8 • When reference rate of RBI is not available then the value shall be determined at 1% of total rupees . • In case of exchange of other currency other than INR – • 1% of lessor amount of conversion of both currency in INR at reference rate of RBI.

22. Provisional Assessment-S.44A • Section 44A provides for provisional assessment at the request of the taxable person to proper officer when unable to determine value or rate of tax.

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