SIRC OF ICAI ARRC on GST
VALUE OF TAXABLE SUPPLY (Section 15 of CGST Act)
Introduction:
The tax is normally payable on percentage of value of supply of goods & services.
The value of a supply of goods or services or both shall be the transaction value.
Transaction Value is the price paid or payable for the supply of goods & services or both where the supplier and recipient of supply are not related.
The price is the major part of supply.
The Value of Supply includes:
- Any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act.
- Any amount the supplier is liable to pay for the supply but not included in price paid or payable for Goods & Services (or) both.
- Incidental expenses including Commission Expenses Charged by the supplier or any amount charged by the supplier for supply of goods & services or both, at the time of, or before delivery of goods & services or both.
- Interest or Penalty or Late Fee for Payment delay of any supply.
- Subsidies directly linked to price without the subsidies of Central or State Government
The Value of Supply does not include:
- Before Supply: If Discount is duly recorded in invoice issued for supply.
- After Supply :
(i) Discount is established in terms of agreement before supply and linked to relevant Invoices.
(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.
Person:
Person includes Legal Person, who are associated in the business of one another in that one is the sole agent or sole distributor shall be deemed to be related.
Person shall be deemed to “Related Persons” if – Persons are
- Officers or directors of one another’s businesses
- Legally recognised partners in business
- Employer and employee
- Person who directly or indirectly controls or holds 25% or more outstanding voting shares or stock or both of them.
- One of them directly or indirectly controls the other
- Both of them are directly or indirectly controlled by a third person
- Together they directly or indirectly control a third person
- They are members of the same family.
Example:
Thevalue of goods &/or services supplied is the transaction value, i.e. the price paid/payable, which is Rs 3,000 in the example. Assuming CGST=9% and SGST= 9%
Value of Goods or Service 3,000
Add: CGST @9% 270
Add: SGST @9% 270
Total 3,540
Note: Discounts will be treated differently under GST.Discounts given before or at the time of supply will be allowed as deduction from transaction value. Discounts given after supply will be allowed only if certain conditions are satisfied.
VALUATION RULES (Draft)
- Value of supply of goods or services where the consideration is not wholly in money:
When consideration is not money, the value of supply shall,
a)Be the open market value.
b)If open market value is not available the total sum of consideration in money and further amount equivalent not in money, If it is known at time of supply.
c)If value is not determined under any of the clauses above mentioned then supply of goods or services or both of like kind and quality;
d)If value is not determinable the value shall be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money.
“Open Market Value” of a supply of goods or services or both means the full value in money, excluding tax and cess payable by a person in a transaction, where the supplier and the receiver of the supply are not related and price is the sole consideration, to obtain such supply at the same time when the supply being valued is made.
“Supply of Goods or services or both of like kind and quality” means any other supply of goods or services or both made under situation that relates to characteristics, quality, quantity, functional components, materials, and reputation of the goods or services or both first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both.
Illustration:
Where a Bike is supplied for Rs.70,000/- along with the exchange of an old bike and if the price of the new bike without exchange is Rs.78,000/-, the open market value of the new bike is Rs.78,000/-
- Value of supply of goods or services or both between distinct or related persons, other than through an agent:-
In this the valueof supply shall,
(a) Be the open market value of such supply;
(b) If open market value is not available, be the value of supply of goods or services of like kind and quality;
(c) If value is not determinable under clause (a) or (b), the value shall be determined based on cost or Residual Method.
When the recipient is eligible for input tax credit then the value in invoice shall be deemed to open market.
- Value of supply of goods made or received through an agent :-
The value of supply of goods between the principal and his agent shall
(a)be the open market value of the goods supplied, or at the option of the supplier, be 90% of price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient.
(b)The value of a supply is not determinable under clause (a), the same shall be determined by application of Value of supply of goods or services or both based on cost Residual method for determination.
Illustration:
Where a principal supplies dhal to his agent and agent is supplying dhal of like kind and quality in subsequent supplies at a price of Rs.5,000per quintal on the day of supply.Another independent supplier is supplying dhal of like kind and quality to the said agent at the price of Rs.4,550 per quintal.The value of the supply made by the principal shall be Rs.4,550 per quintal or where he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.
- Value of supply of goods or services or both based on cost
a)The value of a supply of goods or services or both is not determinable by any of the preceding rules.
b)The value shall be 110% of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services.
- Residual method for determination of value of supply of goods or services or both
a)The value of supply of goods or services or both, cannot be determined under the consideration is not wholly in money, between distinct or related persons, other than through an agent, made or received through an agent, based on cost
b)It shall be determined using reasonable means consistent with the principles and general provisions of Value of Taxable Supply (Section 15)
- Determination of value in respect of certain supplies
The value of supply of services in relation to purchase or sale of foreign currency, including money changing
(a)For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency:
- In case where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received by the person changing the money:
- In case where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI.
- If a person supplying the services may exercise option to ascertain value in terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that financial year.
(b) At the option of supplier of services, the value in relation to supply of foreign currency, including money changing, shall be deemed to be
(i) 1% of the gross amount of currency exchanged for an amount up to Rs.1 Lakh, subject to a minimum amount of Rs 250;
(ii) Rs.1000 and ½%. of the gross amount of currency exchanged for an amount exceeding Rs.1 Lakhand up to Rs.10 Lakh and
(iii) Rs.5000 and one tenth of a per cent. of the gross amount of currency exchanged for an amount exceeding Rs.10 Lakhs, subject to maximum amount of Rs.60000.
(c). The value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent, shall be deemed to be an amount calculated at the rate of 5% of the basic fare in the case of domestic bookings, and at the rate of 10% of the basic fare in the case of international bookings of passage for travel by air.
The value of supply of services in relation to life insurance business shall be:
(a) The gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder, if such amount is intimated to the policy holder at the time of supply of service
(b) In case of single premium annuity policies other than (a), ten per cent. of single premium charged from the policy holder
(c) In all other cases, 25% of the premium charged from the policy holder in the first year and 12 ½ of the premium charged from policy holder in subsequent years
This sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.
Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on purchase of such goods, the value of supply shall be the difference between the selling price and purchase price and where the value of such supply is negative it shall be ignored.
The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.
- Value of supply of services in case of pure agent
The expenditure cost incurred by supplier as pure agent can be excluded if the following conditions are satisfied
a)the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party as the contract is between third party & and recipient of supply
b)The receiver procures services provided by supplier, service provider in his capacity as pure agent of receiver of supply.
c)The receiver is liable make payment to third party
d)The receiver authorises the supplier to make payment on his behalf
e)The recipient of supply knows that the services for which payment has been made by the supplier shall be provided by the third party
f)The payment made by the supplier on behalf of the recipient of supply has been separately indicated in the invoice issued by the supplier to receiver
g) the supplier recovers from the receiver only such amount paid by him to the third party
h)The services procured by the supplier from the third party as a pure agent of the recipient of supply are in addition to the supply he provides on his own account
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.
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PLACE OF SUPPLY OF GOODS
Place of supply will play vital role for determination levy of CGST & SGST or IGST
Determination of Place of supply of Goods:
The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,
a)Where the supply involves movement of goods:
Whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient
b)Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person:
Whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person
c)Where the supply does not involve movement of goods
Whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient
d)Where the goods are assembled or installed at site
The place of supply shall be the place of such installation or assembly
e)Where the goods are supplied on board a conveyance
Including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.
Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.
Place of supply of Service for Import and Export:-
1)Imported into India shall be the location of the importer
2)Exported from India shall be the location outside India.
3)The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.
Place of Supply of Services:-
Location of Supplier: The place of supply of services,
a) Made to a registered person shall be the location of such person
b)Made to any person other than a registered person shall be,––
(i) The location of the recipient where the address on record exists; and
(ii) The location of the supplier of services in other cases.
Place of Supply of service is location of Immovable Property :
a)Directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts orestate agents, any service provided by way of grant of rights to use immovableproperty or for carrying out or co-ordination of construction work;
b)By way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel
c)By way of accommodation in any immovable property for organising any
marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or
d)Any services ancillary to the services referred to in clauses (a), (b) and (c),
shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:
The location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.
Example:
Say, X Company located in Mumbai engages the services of A Architect also located in Mumbai,. M/s X request him to make design of residential complex to be constructed in Hyderabad, Telengana . Mr. A makes design and drawing of the residential complex which will be constructed in Hyderabad. Therefore as per the provisions of section12(3), the place of supply of service will be Hyderabad . Hence Mr. A will be required to charge IGST for the services rendered to M/s X, although both Mr. A and M/s Y are located of the service provider and recipient of service are not relevant for deciding place of supply of service.
Place of Supply of services provided by specified person:
- The place of supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery shall be the location where the services are actually performed.
- The place of supply of services in relation to training and performance appraisal.
Determination of Place of Supply of services :
A person other than a registered person shall be the location where the services are actually performed.
a) The place of supply of services provided by way of admission to a cultural, artistic, sporting, scientific, educational, entertainment event or amusement park or any other place and services ancillary thereto, shall be the place where the event is actually held or where the park or such other place is located.
b) The place of supply of services provided by way of,—organisation of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events
c)The place of supply of services by way of transportation of goods, including bymail or courier to,––
(a) A registered person shall be the location of such person;
(b) A Unregistered person shall be the location at which such goods are handed over for their transportation.
d)The place of supply of passenger transportation service to,—
(a) A registered person shall be the location of such person;
(b) A Unregistered person shall be the place where the passenger embarks on the conveyance for a continuous journey
e)Provided that where the right to passage is given for future use and the point ofembarkation is not known at the time of issue of right to passage, the place of supplyof such service shall be determined in accordance with the provisions of sub-section (2).
f)The place of supply of services on board a conveyance, including a vessel, anaircraft, a train or a motor vehicle, shall be the location of the first scheduled point ofdeparture of that conveyance for the journey.
Example: Say Airline X provides the services of Transportation of passenger by air in Mumbai – Delhi route. The food is served on board during the journey of Mumbai-Delhi. The food is supplied by Y caterer to aircraft in Mumbai. As per subsection (10) , the place of supply of service will be Mumbai as per scheduled point of department of aircraft’s journey in Mumbai.
Telecommunication, Data Transfer, Broadcasting, cable, DTH, etc.:
The place of supply of telecommunication services including data transfer, broadcasting, and cable and direct to home television services to any person shall
a) In case of services by way of fixed telecommunication line, leased circuits,
Internet leased circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services;