GST Valuation

In order to levy tax, taxable value must be known, so we hereby explain the concept that how value shall be ascertained. Value taken for levy of tax rate shall be transactional value i.e price actually paid or payable, when parties are not related, price is sole consideration and includes any amount which the supplier is liable to pay but has been paid by the recipient of supply. Valuation provisions of CGST SGST and IGST of goods and services are same.

Methods of valuations

Following methods must be followed in sequence:

  • Comparative method

  • Computation method

  • Residual method

Valuation by Comparison

Where the value of a supply cannot be determined under the above provisions, the value shall be determined on the basis of the transaction value of goods and/or services of like kind and quality supplied at or about the same time to other customers. In determining the value of goods and/or services the proper officer shall take into consideration the following factors :–

  • Difference in the dates of supply,

  • Difference in composition, quality and design between the goods and/or services being valued and the goods and/or services with which they are compared,

  • Difference in commercial levels and quantity levels,

  • Difference in freight and insurance charges depending on the place of supply.

Computed value method

If the value cannot be determined as per above provisions, it shall be based on a computed value which shall include the following:-

  • The cost of production, manufacture or processing of the goods or, the cost of provision of the services;

  • Charges, if any, for the design or brand;

  • An amount towards profit and general expenses equal to that usually reflected in supply of goods and/or services of the same class or kind as the goods and/or services being valued which are made by other suppliers.

Residual method

Where the value of the goods and/or services cannot be determined under any of the provisions, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules.

What should be included in transactional value?

Following are the inclusion in transaction value as per valuation rules :

  • Any amounts paid by recipient that are obligation of supplier to pay;

  • Money value of goods or services provided free or at concession by recipient;

  • Royalties and license fees payable by recipient as a condition of supply;

  • Taxes levied under any other law(s) (other than SGST / CGST or IGST)

  • Expenses incurred by supplier before supply and charged separately;

  • Subsidy realized by supplier on the supply;

  • Reimbursements claimed separately by supplier;

  • Discounts allowed ‘after’ supply except when known before supply; (Discounts allowed as a normal trade practice and reflected on the face of the invoice shall not be included).

Specific Valuation Methods

Specific valuation methods must be followed in case of pure agent, money changer, insurer, air travel agent and distributor or selling agent of lottery.