Valuation as per GST Valuation
Rules 2016.
As
per Section 15 of the Model GST Law the supply of goods and services shall be
taxable to GST at the transaction value subject to Rule 7 of GST Valuation
Rules 2016. Section 15(4) provides for various situations where the valuation
rules shall be applied:
(i)
the
consideration, whether paid or payable, is not money, wholly or partly;
(ii)
the
supplier and the recipient of the supply are related;
(iii)
there
is reason to doubt the truth or accuracy of the transaction value declared by
the supplier;
(iv)
business
transactions undertaken by a pure agent, money changer, insurer, air travel
agent and distributor or selling agent of lottery;
(v)
such
other supplies as may be notified by the Central or a State Government in this
behalf on the recommendation of the Council.
Transaction
value shall be the value determined in monetary terms for the taxable
supplies. Where the supply consists of
both taxable and non-taxable supply, the taxable supply shall be deemed to be
for such part of the monetary consideration as is attributable thereto.
It
has been explicitly provided that in case of related parties also, transaction
value shall be accepted, provided that the relationship has not influenced the
price. Hence the arm length pricing has to be followed.
Where
the goods are transferred from (a) one place of business to another place of
the same business, (b) the principal to an agent or from an agent to the
principal, whether or not situated in the same state, the value of such supply
shall be transaction value.
As
per Rule 7 of valuation rules where the proper officer has reason to doubt the
truth or accuracy of the value declared in relation to any goods and/or
services, he may ask the supplier to furnish the further information. Even upon
the submission of this further information the proper officer has reasonable
doubt on the truth and the accuracy of the value declared, it shall be deemed
that the value cannot be determined at transaction value and hence value shall
be adopted as per the GST Valuation Rules 2016.The reasons for the doubt of the
proper officer shall be intimated to the taxpayer in writing and an opportunity
shall be given before enforcing the valuation rules. The various incidents
where the proper officer may have a reasonable doubt are following:
(i)
the
significantly higher value at which goods and/or services of like kind or
quality supplied at or about the same time in comparable quantities in a
comparable commercial transaction were assessed;
(ii)
the
significantly lower or higher value of the supply of goods and/or services
compared to the market value of goods and/or services of like kind and quality
at the time of supply; or
(iii)
any
mis-declaration of goods and/or services in parameters such as description,
quality, quantity, year of manufacture or production.
In such a case
where the transaction value has been rejected the following methods shall be
adopted by the proper officer:
S. No.
|
Method
|
Rule No.
|
Description
|
1.
|
Comparison
Method
|
4
|
Transaction
value of goods/services of like kind and quality supplied at or about the
same time to other customers adjusted with factors like:
(a)
Difference in dates of supply;
(b)
Difference in commercial levels and quantity
levels;
(c)
Difference in character of goods/services;
(d)
Difference in other expenses relating to place of
supply
|
2.
|
Computed Value
Method
|
5
|
This method
shall be imposed only where Rule 4 could not be applied. Under this method
the complete cost of the goods/services including the profit margins shall be
deemed to be the value of goods/services.
|
3.
|
Residual
Method
|
6
|
Where both
Rule 4 and Rule 5 fail to apply the
value shall be determined using the reasonable means consistent with the
principles and general provisions of these rules.
|
Valuation in case of Special Cases:
S. No.
|
Case
|
Rule
|
Valuation
|
1.
|
Pure Agent
|
8(1)
|
Transaction
value shall be adopted excluding the expenditures and cost incurred by the
service provider (SP) as a pure agent of the recipient (SR) of services,
provided all the following conditions are fulfilled:
i)
SP acts as pure agent when making payment to third
party,
ii)
The Beneficiary should be Service Recipient,
iii)
SR is liable to make payment to third party,
iv)
SR authorize SP to make payment on his behalf,
v)
The fact of payment should be known to SR,
vi)
The amount paid on behalf of SR should be
separately indicated in invoice,
vii)
SP recovers the amount from SR paid by him to
third party; and
viii)
The goods procured from third party is in addition
to the services provided by SP on his own account.
|
2.
|
Money Changer
|
8(2)
|
a)
For currency
exchanged in INR:
(Buying/Selling
Rate – RBI reference rate) X Total Units of currency exchanged
Where
the Reference Rate is not available the valuation shall be at 1% of the Gross
Amount of Indian Rupees Provided or received by person exchanging the money.
b)
For currency
NOT Exchanged in INR:
1%
of the lesser of the two amounts the person changing the money would have
received by converting any two currencies into Indian Rupee on that day at
the reference rate provided by RBI. In
such case reference rate is a must.
|
By:
Keshav R Garg
(B.Com, FCA, CS, ISA(ICAI))
Faculty for GST: Indirect Tax Committee of ICAI
Author: Bharat's GST Ready Reckoner
A Handbook on GST
Member: Indirect Tax Committee of CII, PHDCCI, MyGst.MyTax Foundation
Address: 3328, Sector 27 D, Chandigarh, India - 160 019
Phones: +91-172-461-3328, +91-98880-90008
Comments
Post a Comment