Chapter 7 - Value of Supply - Notes

Chapter 7 – Value of Supply
Introduction
GST liability is calculated by applying the rate of tax on the value of supply. This is known as ad-valorem
basis. In this chapter, we’ll learn how is the value of supply determined. Section 15 of the CGST Act
along with CGST Rules prescribes the provisions for determining the value of supply of goods and
services made in different circumstances and to different persons.
Section 15: Value of Taxable Supply

(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 State Governments.
(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.
Explanations
1. Persons shall be deemed to be “related persons” if:
a. such persons are officers or directors of one another’s businesses;
b. such persons are legally recognised partners in business;
c. such persons are employer and employee;
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d. 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;
e. one of them directly or indirectly controls the other;
f. both of them are directly or indirectly controlled by a third person;
g. together they directly or indirectly control a third person; or
h. they are members of the same family;
2. The term “person” also includes legal persons;
3. 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.
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Question 1
From the following information, determine the value of taxable supply as per the provisions of Section
15 of the CGST Act, 20177.
Particulars ₹
Contracted value of supply of goods (including GST @ 18%) 11,00,000
The contracted value of supply includes the following:
1. Cost of primary packing 25,000
2. Cost of protective packing at recipient’s request for safe transportation 15,000
3. Design and engineering charges 85,000
Other information:
1. Commission paid to agent by recipient on instruction of supplier 5,000
2. Freight and insurance charges paid by recipient on behalf of supplier 75,000
Give reasons with suitable assumptions where necessary.
Solution
Computation of Value of Taxable Supply of Goods

Particulars ₹
Contracted value of supply of goods 11,00,000
1. Cost of Primary Packing (Note 1) -
2. Cost of Protective Packing at Recipient's request for Safe Transportation -
(Note 1)
3. Design and Engineering Charges (Note 2) -
Add: Commission paid to agent by recipient on instruction of supplier (Note 5,000
3)
Add: Freight and Insurance charges paid by recipient on behalf of supplier 75,000 80,000
(Note 3)
Cum Tax Value 11,80,000
Less: GST @ 18% [₹11,80,000 × 18 ÷ 118] (Note 4) 1,80,000
Value of Taxable Supply 10,00,000
Notes:
1. As per Section 15(2)(c) of the CGST Act, 2017, cost of primary packing and protective packing
at recipient's request for safe transportation charged by supplier from the recipient shall be
included for determining the value of taxable supply. Since it is already included in the value,
no treatment is required.
2. As per Section 15(2)(c) of the CGST Act, 2017, any amount charged for anything done by the
supplier in respect of the supply of goods at the time of, or before delivery of goods shall be
included in the value of taxable supply. Hence, design and engineering charges shall also be
included in the value of taxable supply. Since it is already included in the value, no treatment
is required.
3. As per Section 15(2)(b) of the CGST Act, 2017, 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 shall be included in the value of
supply. Thus, commission paid to agent by recipient on instruction of supplier and freight and
insurance charges incurred by recipient on behalf of supplier shall form part of value of taxable
supply.
4. As per Section 15(2)(a) of the CGST Act, 2017, value of supply shall not include any taxes or
cesses levied under CGST Act, SGST Act, UTGST Act, and the GST (Compensation to States) Act,
if charged separately by the supplier.
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Question 2
From the following information, determine the value of taxable supply as per the provisions of Section
15 of the CGST Act, 2017:
Particulars ₹
Value of machine (including GST @ 12%) 15,00,000
The invoice value includes the following:
1. Taxes (other than CGST/SGST/IGST) charged separately by the supplier 15,000
2. Weighment and loading charges 25,000
3. Consultancy Charges in relation to pre-installation planning 10,000
4. Testing Charges 2,000
5. Inspection Charges 4,500
Other information:
1. Subsidy received from Central Government for setting up factory in backward 51,000
region
2. Subsidy received from third party for timely supply of machine to recipient 50,000
3. Trade discount actually allowed shown separately in invoice 24,000
Give reasons with suitable assumptions where necessary.
Solution
Computation of Value of Taxable Supply of Goods

Particulars ₹
Value of Machine 15,00,000
Less:
1. Taxes other than CGST/SGST/IGST charged separately by the supplier (Note -
1)
2. Weighment and loading charges (Note 2) -
3. Consultancy Charges in relation to pre-installation planning (Note 2) -
4. Testing charges (Note 2) -
5. Inspection Charges charged before supply (Note 2) -
6. Trade discount actually allowed shown separately in invoice (Note 3) 24,000 24,000
14,76,000
Add: Subsidy received from third party for timely supply of machine to 50,000
recipient (Note 4)
Less: GST @ 12% [₹15,26,000 × 12 ÷ 112] (Note 5) 1,63,500
Notes:
1. As per Section 15(2)(a) of the CGST Act, 2017, any duty, taxes, cesses, fees and other charges,
charged separately by supplier are to be included in the value of taxable supply. Since it is
already included in the value, no treatment is required.
included in the value of taxable supply. Hence, weighment and loading charges, consultancy
charges, testing charges and inspection charges shall also be included in the value of supply.
Since it is already included in the value, no treatment is required.
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3. As per Section 15(3)(a) of the CGST Act, 2017, value of supply shall not include any discount
which is given before or at the time of the supply if such discount has been duly recorded in
the invoice issued in respect of such supply. Hence, the same is deductible to arrive at the
value of supply.
4. As per Section 15(2)(e) of the CGST Act, 2017, the value of supply shall include subsidies
directly linked to the price excluding subsidies provided by the Central Government and State
Governments. Hence, subsidy received from third party for timely supply of machine to
recipient will be included in the value of taxable supply whereas subsidy received from Central
Government for setting up factory in backward region shall not be included in value of taxable
supply.
Question 3
Comfort footwear, a registered supplier of Agra, has a non-moving stock worth ₹8,00,000 of a
particular variety of shoes that are out of fashion. It has not been able to find market in spite of huge
discounts offered. Subsequently, it was able to sell this stock at a very low price of ₹5,00,000 to a
retailer in Madhya Pradesh with a condition that the retailer would display hoardings of Comfort
Footwear in all their retail outlets in the state. Determine the value of supply.
Solution
In this case, the supplier and recipient are not related persons. Although a condition is imposed on the
recipient on effecting the sale, such a condition has no bearing on the contract price. This is a case of
distress sale, and in such a case, it cannot be said that the supply is lacking ‘sole consideration’.
Therefore, the price of ₹5,00,000 will be accepted as value of supply.
Question 4
Determine the value of taxable supply as per Section 15 of the CGST Act, 2017 and the rules thereof:
Particulars ₹
Contracted sale price of goods (including CGST and SGST @ 5%) 10,56,000
The contracted sale price includes the following elements of cost:
1. Cost of drawings and design 5,000
2. Cost of primary packing 2,000
3. Cost of packing at buyer’s request 4,000
4. Freight and insurance from ‘place of removal’ to buyer’s premises 43,000
A discount of ₹6,000 was given by the supplier at the time of supply of goods. CGST and SGST is levied
@ 5%.
Solution
Computation of Value of Taxable Supply

Particulars ₹
Contracted sale price of goods 10,56,000
Less: Discount (Note 2) 6,000
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Less: GST @ 5% [₹10,50,000 × 5 ÷ 105] (Note 3) 50,000
Notes:
included in the value of taxable supply. Hence, drawing and design charges, cost of packing
(even at buyer's request) and freight and insurance charges shall form a part of the transaction
value of the supply. Since these are already included in the value of the goods, hence, separate
treatment is not required.
2. As per Section 15(3)(a) of the CGST Act, 2017, value of supply shall not include any discount
which is given before or at the time of the supply.
Question 5
XYZ Pvt. Ltd. has provided the following particulars relating to goods sold by it to ABC Pvt. Ltd.
Particulars ₹
List price of the goods (exclusive of taxes and discounts) 1,25,000
Tax levied by Municipal Authority on the sale of such goods 15,000
CGST and SGST chargeable on the goods 19,200
Packing charges (not included in price above) 15,500
XYZ Pvt. Ltd. received ₹9,500 as a subsidy from a Non profit making organisation in respect of timely
supply of such goods. The price of ₹1,25,000 of the goods is after considering such subsidy. XYZ Ltd.
offers 4% discount on the list price of the goods which is recorded in the invoice for the goods.
Determine the value of taxable supply made by XYZ Pvt. Ltd.
Solution

Particulars ₹
List Price of the goods (exclusive of taxes and discounts) 1,25,000
Add: Tax levied by Municipal Authority on the sale of such goods (Note 1) 15,000
Add: CGST and SGST chargeable on the goods (Note 1) -
Add: Packing charges (Note 2) 15,500
Add: Subsidy received from a non-government body (Note 4) 9,500
Total 1,65,000
Less: Discount @ 4% on ₹1,25,000 5,000
Notes:
1. As per Section 15(2)(a) of the CGST Act, 2017, any duty, taxes, cesses, fees and other charges,
levied under any law for the time being in force other than the CGST Act, SGST Act, the UTGST
Act, and the GST (Compensation to States) Act, if charged separately by the supplier.
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included in the value of taxable supply. Hence, cost of packing shall form a part of the
transaction value of the supply.
3. As per Section 15(3)(a) of the CGST Act, 2017, the value of supply shall not include any discount
which is given before or at the time of supply.
Governments. Hence, subsidy received from non profit making organisation for timely supply
of goods will be included in the value of taxable supply.
Question 6
Floral Advertisers conceptualised and designed the advertising campaign for a new product launched
by Jupiter Stampings Pvt. Ltd. for a consideration of ₹25,00,000. Floral Advertisers owed ₹4,50,000 to
one of its vendors in relation to the advertising service provided by it to Jupiter Stampings Pvt. Ltd.
Such liability of Floral Advertisers was discharged by Jupiter Stampings Pvt. Ltd. Jupiter Stampings Pvt.
Ltd. delayed the payment of consideration and thus, paid ₹50,000 as interest. Assume the rate of GST
to be 18%.
Determine the value of taxable supply made by Floral Advertisers.
Solution

Particulars ₹
Service Charges 25,00,000
Payment made by Jupiter Stampings Pvt. Ltd. to Vendor of Floral Advertisers (Liability 4,50,000
of the supplier being discharged by the recipient, is includible in the value in terms of
Section 15(2)(b))
Interest for delay in payment of consideration (includible in the value in terms of 42,373
Section 15(2)(d)) (Note)
Note: The interest for delay in payment of consideration will be includible in the value of supply but
the time of supply of such interest will be the date when such interest is received in terms of Section
13(6). This interest would be inclusive of GST, and therefore, for the purpose of adding it to the value
of supply, ex-GST interest is to be added. Ex-GST Interest = 50,000 × 100 ÷ 118 = ₹42,373.
Question 7
Supreme Foods Pvt. Ltd. gets an order for supply of processed food from Hotelia Ltd. Hotelia Ltd. wants
the consignment for gluten or specified chemical residues. Supreme Foods Pvt. Ltd. does the testing
and charges a testing fee of ₹15,000 from the Hotelia Ltd. Supreme Foods Pvt. Ltd. argues that such
testing fees should not form part of the consideration for the sale as it is a separate activity. Is its
argument correct in the light of Section 15?
Solution
Section 15(2) mandates the addition of certain elements to transaction value to arrive at taxable value.
Section 15(2)(c) specifies that amount charged for anything done by the supplier in respect of the
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supply at the time of or before the delivery of goods or supply of services shall be included in taxable
value.
Since Supreme Foods Pvt. Ltd. does the testing before the delivery of goods, the charges therefor will
be included in the taxable value. Therefore, Supreme Foods Pvt. Ltd.’s argument is not correct. The
testing fee of ₹15,000 should be added to the price to arrive at taxable value of consignment.
Question 8
Vikash Charitable Institution makes a substantial donation each year to a reputed private management
institution to subsidise the education of low income group students who have gained admission there.
The fee for these individuals is reduced thereby, coming to ₹1 lakh a year compared to ₹4 lakh a year
for other students. What would be the taxable value of the service of coaching and instruction provided
by the institution?
Solution
As per Section 15(2)(e), the value of a supply includes subsidies directly linked to the price, excluding
State Government and Central Government subsidies. In this case, the subsidy is not from the
Government but is from a charitable institution. Therefore, the subsidy is to be added back to the price
to arrive at the taxable value, which comes to ₹4 lakh a year.
Question 9
Floral advertising, an advertising firm, gives an interest-free credit period of 30 days for payment by
the customer. One of its customers paid for the supply 40 days after the supply of service. Floral
advertising waived the interest payable for delay of ten days. The Department wants to add interest
for 10 days as per contract. Should notional interest be added to the taxable value?
Solution
This is a supply that is valued as per transaction value under Section 15(1) as the price is the sole
consideration for the supply and the supply is made to unrelated person. The concept of transaction
value has been expanded to include certain elements like interest which are actually payable. Once
waived, the interest is not payable and is therefore, not to be added to transaction value.
Question 10
Leather Products Ltd. sells shoes to its dealers, to whom it charges the list price minus standard
discount and pays GST accordingly. When such shoes remain unsold with the dealers, it offers
additional discounts on the stock as an incentive to push the sales. Can this additional discount be
reduced from the price at which the goods were sold and concomitant tax adjustments made?
Solution
The discounts were not known or agreed at the time of supply of goods to the dealers. Therefore, such
discounts cannot be reduced from the price on which tax had been paid in terms of Section15(3).
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Question 11 – May, 2018 – 4 Marks
Shri Krishna Pvt. Ltd., registered dealer, furnishes the following information relating to goods sold by
it to Shri Balram Pvt. Ltd. in the course of Intra-State.
Particulars ₹
1. Price of goods 1,00,000
2. Municipal tax 2,000
3. Inspection charges 15,000
4. Subsidies received from Shri Ram Trust (As the product is going to be used by 50,000
blind association)
5. Late fees for delayed payment. (Though Shri Balram Pvt. Ltd. made late payment 1,000
but these charges are waived by Shri Krishna Pvt. Ltd.)
6. Shri Balram Pvt. Ltd. paid to Radhe Pvt. Ltd. (on behalf of Shri Krishna Pvt. Ltd.) 2,000
weighment charges
According to GST Law, determine the value of taxable supply made by Shri Krishna Pvt. Ltd., Items
given in Point (2) to (6) are not considered while arriving at the price of the goods given in point no.
(1).
Solution

Particulars ₹
Price of goods 1,00,000
Add: Municipal tax (Note 1) 2,000
Add: Inspection charges (Note 2) 15,000
Add: Subsidies received from Shri Ram Trust (Note 3) 50,000
Add: Late fees for delayed payment (Note 4) -
Add: Weighment Charges (Note 5) 2,000
Notes:
1. As per Section 15(2)(a) of the CGST Act, 2017, the value of supply shall include any taxes,
duties, cess, fees and charges levied under any law for the time being in force other than the
CGST Act, the SGST Act, the UTGST Act and the GST (Compensation to States) Act, if charged
separately by the supplier.
2. As per Section 15(2)(c) of the CGST Act,2017, any amount charged for anything done by the
included in the value of taxable supply. Hence, inspection charges shall form a part of the
3. As per Section 15(2)(e) of the CGST Act,2017, the value of supply shall include subsidies directly
linked to the price excluding subsidies provided by the Central Government and State
Governments. Since subsidy is received from non government body, the same is includible in
the value of taxable supply.
4. Charges for delayed payment shall form part of the value of supply. Since the same has been
waived by the recipient, it will not be included in the value of taxable supply.
5. As per Section 15(2)(b) of the CGST Act, 2017, 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 shall form part
of transaction value. Hence weighment charges shall form part of value of taxable supply.
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Candy Blue Ltd., Mumbai, a registered supplier, is manufacturing Chocolates and Biscuits. It provides
the following details of taxable inter-state supply made by it for the month of October 2021:
Particulars ₹
List price of goods supplied inter-state 12,40,000
Items already adjusted in the price given above:
1. Subsidy from Central Government for supply of Biscuits to Government School 1,20,000
2. Subsidy from Trade Association for supply of quality Biscuits 30,000
Items not adjusted in the list price of ₹12,40,000 given above:
1. Tax levied by Municipal Authority 24,000
2. Packing Charges 12,000
3. Late fee paid by the recipient of supply for delayed Payment of invoice 5,000
Calculate the Value of taxable supply made by M/s. Candy Blue Ltd. for the month of October 2021.
Solution

Particulars ₹
List price of goods 12,40,000
Add: Subsidy from Central Government (Note 1) -
Add: Subsidy from Trade Association (Note 1) 30,000
Add: Tax levied by Municipal Authority (Note 2) 24,000
Add: Packing Charges (Note 3) 12,000
Add: Late fee paid by the recipient of supply for delayed Payment (Note 4) 5,000
Notes:
Governments. Hence, subsidy received from Central Government will not be included while
subsidy from trade association for supply of quality Biscuits will be included in the value of
taxable supply.
separately by the supplier. Thus, tax levied by Municipal Authority shall be included in the
value of taxable supply.
included in the value of taxable supply. Hence, cost of packing shall form a part of the
4. Interest or late fee or penalty for delayed payment of any consideration for any supply as per
Section 15(2)(d) of the Act. Hence, late fee paid by the recipient of supply for delayed payment
of invoice shall form part of value of taxable supply.
Question 13 – November, 2018 – 5 Marks
Mr. Achintya a registered supplier in Kochi (Kerala State) has provided the following details in respect
of her supplies made within Intra-State for the month of March 2022:
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Particulars ₹
1. List price of goods supplied intra-State (exclusive of items given below from (2) 3,30,000
to (5))
2. Swachh Bharat cess levied on sale of the goods 12,500
3. Packing expenses charged separately in the invoice 10,800
4. Discount of 1% on list price of goods was provided (recorded in the invoice of
goods)
5. Subsidy received from State Government for encouraging women entrepreneurs 5,000
Compute the value of taxable supply and the gross GST liability of Mr. Achintya for the month of March
2022 assuming rate of CGST to be 9% and SGST to be 9%. All the amounts given above are exclusive of
GST.
Solution

Particulars ₹
List Price of Goods 3,30,000
Add: Swachh Bharat cess (Note 1) 12,500
Add: Packing Expenses charged separately (Note 2) 10,800
3,53,300
Less: Discount @ 1% on List Price (Note 3) 3,300
Less: Subsidy received from State Government (Note 4) 5,000 8,300
CGST @ 9% 31,050
SGST @ 9% 31,050
Gross GST Liability 62,100
Notes:
separately by the supplier. Thus, Swachh Bharat cess levied on sale of the goods shall be
included in the value of taxable supply.
included in the value of taxable supply. Hence, packing expenses shall form a part of the
3. As per Section 15(3)(a) of the CGST Act, 2017, the value of supply shall not include any discount
which is given before or at the time of supply.
Governments. Hence, subsidy received from State Government for encouraging women
entrepreneurs will not be included in the value of taxable supply.
5. In the above answer, the term "exclusive" mentioned in the question has been taken to be as
"not adjusted in the list price", i.e., the list price given in the question is before adjusting the
amount of discount and subsidy. However, it is also possible to take a view that the list price
"excludes" amount of discount and subsidy. Therefore, the same need not be deducted again
from the list price to arrive at the taxable value.
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Question 14 – RTP May, 2019
Kamal Book Depot, a wholesaler of stationery items, registered in Mumbai, has received order for
supply of stationery items worth ₹2,00,000/- on 12th November, 2021 from another local registered
dealer, Mr. Mehta, Mumbai. Kamal Book Depot charged the following additional expenses from Mr.
Mehta:
Particulars ₹
1. Packing charges 5,000
2. Freight & Carriage 2,000
3. Transit insurance 1,500
4. Extra designing charges 6,000
5. Taxes by Municipal Authority 500
The goods were delivered to Mr. Mehta on 14th November, 2021. Since Mr. Mehta was satisfied with
the quality of the goods, he made the payment of goods the same day and simultaneously placed
another order on Kamal Book Depot of stationery items amounting to ₹10,00,000 to be delivered in
the month of December, 2021**. On receipt of second order, Kamal Book Depot allowed a discount of
₹20,000 on the first order placed by Mr. Mehta.
Compute the GST liability of Kamal Book Depot for the month of November, 2021 assuming the rates
of GST on the goods supplied as under: CGST 9% & SGST 9%
Would your answer be different if expenses (1) to (5) given in above table are already included in the
price of ₹2,00,000?
Note:
1. All the amounts given above are exclusive of GST.

2. Kamal Book Depot and Mr. Mehta are not related persons and price is the sole consideration
of the supply.
**Payment and invoice for the second order will also be made in the month of December, 2021 only.
Solution
Computation of Value of Taxable Supply and Gross GST Liability

Particulars ₹
Price of Goods (Note 1) 2,00,000
Add: Packing Charges (Note 2) 5,000
Add: Freight & Carriage (Note 3) 2,000
Add: Transit Insurance (Note 3) 1,500
Add: Extra designing charges (Note 4) 6,000
Add: Taxes by Municipal Authority (Note 5) 500
CGST @ 9% 19,350
SGST @ 9% 19,350
GST Liability 38,700
Notes:
1. As per section 15(1) of the CGST Act, 2017, the value of a supply is the transaction value i.e.,
the price actually paid or payable for the said supply.
2. All incidental expenses including packing charged by the supplier to the recipient are includible
in the value of supply in terms of section 15(2) of the CGST Act, 2017.
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3. The given supply is a composite supply involving supply of goods (stationery items) and
services (transit insurance and freight) where the principal supply is the supply of goods. As
per section 8(a) of the CGST Act, 2017, a composite supply is treated as a supply of the principal
supply involved therein and charged to tax accordingly.
4. 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; is includible
in the value of supply vide section 15(2) of the CGST Act, 2017. Thus, extra designing charges
are to be included in the value of supply.
5. The taxes by Municipal Authorities are includible in the value of supply in terms of section
15(2) of the CGST Act, 2017.
6. In the given case, Mr, Mehta is allowed a discount of ₹20,000 on the goods supplied to him in
the month of November, 2021. Since the said goods have already been delivered by Kamal
Book Depot, this discount will be a post-supply discount. Further, value of supply shall not
include any discount which is given after the supply has been effected, if:
a. 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
b. 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 [Section15(3) of the CGST
Act, 2017]
However, in the given case, post-supply discount given to Mr. Mehta will not be allowed as a
deduction from the value of supply since the discount policy was not known before the time
of such supply although the discount can be specifically linked to relevant invoice (invoice
pertaining to stationery items supplied to Mr. Mehta in November, 2021).
In case die expenses (1) to (5) given in above table are already included in the price of ₹2,00,000:
Since these expenses are includible in the value of supply by virtue of the reasons mentioned in
explanatory notes above, no further addition will be required. Resultantly, the value of taxable supply
will be ₹2,00,000 and CGST and SGST will be ₹18,000 and ₹18,000 respectively.
Question 15 – MTP May, 2020 – 4 Marks
Kaashi Ltd. supplies machinery to Alisha Ltd. (Dealer in same State), provides following particulars
regarding the same. Determine the value of taxable supply of machinery.
Particulars ₹
1. Price of Machinery (exclusive of taxes and discounts) 5,50,000
2. One part is directly fitted in machinery at place of Alisha Ltd. (amount paid by 20,000
Alisha Ltd. directly to supplier, as per contract this amount should be paid by
Kaashi Ltd. and not included in price)
3. Installation and testing charges for machinery, not included in price 25,000
4. Discount @ 2% on machinery price (recorded in the invoice)
5. Kaashi Ltd. provides additional 1% discount at year end, based on additional
purchase of other machinery (discount is not linked to the relevant invoice and
proportionate ITC has not been reversed by Alisha Ltd.)
Solution
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Particulars ₹
Price of Machinery (exclusive of taxes and discounts) 5,50,000
Add: Amount paid by Alisha Ltd. directly to the supplier for a part fitted in the
machinery (Note 1) 20,000
Add: Installation and Testing Charges (Note 2) 25,000
5,95,000
Less: Discount @ 2% on machinery price (2% × ₹5,50,000) (Note 3) 11,000
Less: Additional discount @ 1% at year-end (Note 4) - 11,000
Notes: As per Section 15 of the CGST Act, 2017:
1. Any amount that the supplier is liable to pay in relation to a 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 shall be included in the value of supply.
2. Any amount charged for anything done by the supplier in respect of the supply of goods at the
time of, or before delivery of goods shall be included in the value of supply.
3. Since discount is given at the time of supply of machinery and recorded in the invoice, the
value of the supply shall not include such discount.
4. Though the additional discount is established before or at the time of supply, it shall not be
excluded from the value of supply as the same is not linked to the relevant invoice and
proportionate ITC has not been reversed by Alisha Ltd.
Question 16 – November, 2021 – 6 Marks
Following are the particulars, relating to one of the machines sold by SQM Ltd. to ACD Ltd. in the month
of February 2022 at list price of ₹9,50,000 (exclusive of taxes and discount). Further, following
additional amounts have been charged from ACD Ltd.:
Particulars ₹
1. Municipal taxes chargeable on the machine 45,000
2. Outward freight charges (Contract was to deliver machine at ACD Ltd.’s factory, 65,000
i.e., F.O.R. contract)
Additional information:
1. SQM Ltd. normally gives an interest-free credit period of 30 days for payment, after that it
charges interest @ 1% p.m. or part thereof on list price.
ACD Ltd. paid for the supply after 45 days, but SQM Ltd. waived the interest payable.
2. SQM Ltd. received ₹50,000 as subsidy, from one non-government organization (NGO) on sale
of such machine. This subsidy was not linked to the price of machine and also not considered
in list price of ₹9,50,000.
3. ACD Ltd. deducted discount of ₹15,000 at the time of final payment, which was not as per
agreement.
4. SQM Ltd. collected ₹9,500 as TCS (tax collected at source) under the provisions of the Income-
tax Act,1961.
Compute the value of taxable supply as per the provision of GST laws, considering that the price is the
sole consideration for the supply and both parties are unrelated to each other.
Note: Correct legal provision should form part of your answer.
Solution
CA NISHANT KUMAR 14
Particulars ₹
List Price (exclusive of taxes and discount) 9,50,000
Add: Municipal Taxes (Note 1) 45,000
Add: Outward Freight Charges (Note 2) 65,000
Notes:
1. Tax other than GST, if charged separately, are includible in the value in terms of section15.
2. Since contract is to deliver machine at buyer's factory, it is a composite supply wherein the
freight charges will be added to the value of principal supply of machine.
3. Value of supply includes interest charged for delayed payment. However, since the interest on
delayed payment has been waived off, the same has not been added to the value.
4. Subsidy provided by non-Government bodies is includible in the value in terms of section15
provided the same is directly linked to the price. Since subsidy received from NGO is not
directly linked to foe price of foe machine, the same has not been added to the value.
5. Since the discount was not known or agreed to at the time of supply of goods to the buyers,
such discount cannot be reduced from the price, in terms of Section 15.
6. TCS is not includible in the value of supply as it is an interim levy not having the character of
tax.
XYZ Pvt. Ltd. provided the following particulars relating to goods sold by it to ABC Pvt. Ltd.:
Particulars Amount (₹)

List price of the goods (exclusive of taxes and discount) 50,000
Tax levied by the Municipal Authority on the sale of such goods 6,000
Packing charges (not included in the list price above) 2,500
Subsidy received from an NGO, directly linked to price (included in the list price above) 3,000
Paid to one of the vendors by ABC Pvt. Ltd. in relation to the service provided by the 2,000
vendor to XYZ Pvt. Ltd. (not included in the list price above)
XYZ Pvt. Ltd. offers 2% discount on the list price after reviewing the performance of ABC Pvt. Ltd. The
discount was not known at the time of supply.
ABC Pvt. Ltd. delayed the payment and paid ₹5,000 (including GST of 18%) as interest to XYZ Pvt. Ltd.
Determine the value of taxable supply made by XYZ Pvt. Ltd. under GST law.
Solution
Computation of Value of Taxable Supply Made by XYZ Pvt. Ltd.

Particulars ₹
List price of the goods (exclusive of taxes and discount) 50,000
Tax levied by the Municipal Authority on the sale of such goods (Note 1) 6,000
Packing charges (Note 2) 2,500
Subsidy received from an NGO, directly linked to price (Note 3) -
Paid to one of the vendors by ABC Pvt. Ltd. in relation to the service provided by the vendor 2,000
to XYZ Pvt. Ltd. (Note 4)
Turnover Discount (Note 5) -
Interest for Delayed Payment (₹5,000 × 100 ÷ 118) (Note 6) 4,237
CA NISHANT KUMAR 15
Value of Taxable Supply 64,737
Notes:
1. Taxes other than GST, if charged separately, are includible in the value of supply.
2. Packing charges, being incidental expenses, same are includible in the value of supply.
3. Since subsidy is received from a non-Government body and directly linked to the price, the
same is includible in the value of supply. Since it is already included in the price, no treatment
is required.
4. Amount that supplier is liable to pay, but incurred by the recipient, is includible in the value of
supply. It has been most logically assumed that service provided by the vendor to XYZ Pvt. Ltd.
is in relation to supply of goods by XYZ Pvt. Ltd. to ABC Pvt. Ltd.
5. Since discount is not known at the time of supply, it is not deductible from the value of supply.
6. Interest for delayed payment is includible in the value of supply.
CA NISHANT KUMAR 16

Chapter 7 - Value of Supply - Notes

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Chapter 7 – Value of Supply

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