Table of Contents

VALUATION RULES

In simple words, Goods and Service Tax that will be charged on the value of supply made is known as Valuation of Supply under GST. The rules will determine the charging value for GST. The rules are hosted on CBEC’s portal. To make it easier to understand, we have explained the rules or where valuations are required in a succinct.

Value of Supply of Goods or Services when the consideration is not completely in money
Value of Supply of Goods or Services or both between distinct or related person, excluding through the agent
Value of Supply of Goods supplied or received through an agent
Value of Supply of Goods and Services based on cost
Value of Supply of Goods and Services by determining it through the Residual method
Determining the Value with respect to certain supplies
Value of Supply of Service when there is a case of a pure agent. This is exclusive of Principal – Agent related cases.

These rules are however are case specific. The GST Council has listed few businesses that include sale of foreign currency and life insurance business and their specific valuation rules, under Clause 6 mentioned above.

TRANSACTION RULE

Chapter IV of CGST Act, 2017 determines the value on which GST would be levied. The provisions include items like –

Taxes under other statutes,
Interest or late fee for the delayed payment of consideration,
Incidental expenses, subsidy etc. that should be included in the transaction value.

However, Discount is excluded from the Transaction Value. There are different valuation rules that are prescribed under GST for transactions like barter, exchange, transaction with related parties, transaction between principal and agent.

I. Valuation of goods and/or service: Section 15(1) –

Transaction Value is the basis for Valuation for Supply of Goods and/or Services under the GST Regime. Transaction Value is the price paid or payable for supply of goods and/or services. However, it is subjected to two conditions:

Supplier and recipient of the supply are not related;
Price is the sole consideration for the supply

II. Transaction value cannot be based on MRP –

Under Section 4A of the Central Excise Act, the central Government has the power to notify the goods that shall be valued based on the MRP. However, in GST Act there is no provision for determination of value on the MRP basis. Thence, in all cases liability of GST will be determined based on the transaction value.

INCLUSION IN THE TRANSACTION VALUE [Section 15 ( 2)]

The transaction value shall include the following:

(a) Taxes under other statute
Any taxes, duties, cesses, fees and charges levied under any statute other than GST Act or IGST Act, and if charged separately by the supplier to the recipient

(b) Any amount for which supplier is liable to pay
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 and/or services.

(c) Incidental expenses
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;

(d) Interest or late fees
Interest or late fee or penalty for delay in payment of consideration for supply will form part of value.

e) Subsidies
Subsidies directly linked to the price.
(Except subsidies provided by the central and state Governments).

The amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

In simple words, the value of supply under GST includes:

Any taxes, duties, cess, fees, and charges levied under any act, except GST. If the supplier charges separately, then GST Compensation Cess shall be excluded.
Any amount that the supplier is liable to pay that he or she has incurred through the receipt and is not included in the price.
The value will include all incidental expensesin relation to sale like packing, commission etc.
Subsidies linked to supply, excluding the State and Union’s subsidies.
Interest, late fee or penalty for delayed payment of consideration will be included.

CURRENT REGIME

The Taxes are calculated on the value of goods/services-

EXCLUSIONS FROM THE TRANSACTIONS VALUE [Section 15(3)]

The kind of Discounts excluded from the Transaction Value is as follows:

Discount given before or at the time of the supply
Discount given after the supply

However, the discount given after the supply has certain conditions:

The discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoice;
Input tax credit has been reversed by the recipient of the supply as is attributable to the discount issued by the supplies.

Certain Sections like Section 15(4) and Section 15(5) also states about the exclusion

Section 15(4) – where the value of supply of goods or services cannot be determined under section 15(1), the same shall be determined in the manner as may be prescribed.

Section 15(5) – states that, notwithstanding anything contained in section 15(1) or section 15(4), the value of such suppliers as may be notified by the central or a state government in this behalf on the recommendation of the GST council, shall be determined in such manner as may be prescribed.

THE REVISED RULES

The revised rules are similar to the previously released payment rules. The revised edition includes minor changes as per the GST Bills. Some of them include:

Revised Invoicing Rules

The revised rules are clearer about the disclosure requirements on statutory documents under GST. The major revisions include:

The consecutive serial number for the documents can include single or multiple series and certain special characters.
Invoice or debit note issued in respect of recoveries of tax payable under the Sections 74, 129 and 130.The Invoice has to clearly mention that – “input tax credit not admissible.”
Particulars have to be mentioned on “Receipt Voucher” that will be issued on a receipt of advance payments.
The Mechanism to obtain ‘invoice reference number’ by the supplier instead of transporter’s copy of invoice, for the purpose of verification by the authorities has been deleted.
“Delivery challan” is required to be issued at the time of transportation of goods. This is for situations like job work, supply of liquefied goods where details of quantity are unknown at the time of removal from place of business.
Procedure to document the transport of goods in CKD/SKD condition has been written.
The documents issued by ISD that needed disclosures have been rationalized. It has been given a new nomenclature called “ISD invoice” or “ISD Credit note.”
A relaxation has been issued an invoice for 45 days from the date of supply of service extended to insurers.
The requirement to mention the serial numbers of the invoices that was issued by Insurers, Banking Companies and Financial Institutions has been dispensed off.

Revised refund Rules

The revised refund rules include the follows:

Refund allowed to supplier for zero-rated supplies –
It is applied to either of IGST paid on such supplies or the unutilized input credit. Refund for unutilized input tax credit. It is available only on zero-rated output supplies and inverted duty structure, where input tax rate is more than output tax rate.
Refund of GST paid by the recipient in case of deemed exports.
Refund for remainder of advance tax that is deposited by a casual or a non-resident taxable person.
Refund of tax paid for the supply that was not provided either completely or partially. The refund is given where the invoices have not been issued or when a refund voucher is issued.
Refund is allowed for tax collected and is unduly paid to the Central or State Government by treating inter-state supply as intra-state and vice versa, by virtue of Section 77 and Section 19 of the CGST Bill and IGST Bill respectively. There is no interest applied for the correct payment of tax subsequently.
Tourists are allowed to get refunds of GST for the goods purchased from India
Supplies that are deemed to be exports are taxed and the recipient can claim refund of tax paid on such procurements.
EOUs, STP units, etc., are supposedly to pay tax on their first receipt of supply and eventually can claim refund.
The claim for refunds can be made within two years from relevant date. For refunds on zero – rated supplies and inverted duty structure, refund can be claimed at the end of any tax period that is subjected to furnishing all the returns. The refund will be granted within 60 days of receipt of application.
Ninety percent of refund claims are to be issued provisionally within a week of date of acknowledgement. However, this applies only to refund on zero – rated supplies and notified categories or registrants. The balance refund to be granted as per general limit of sixty days.

Some of the provisional refund are subjected to certain rigid conditions that includes,

The Person who is not prosecuted under the Act or an existing law in last 5 years where the tax evaded is more than Rs. 2.5 crores.
Compliance rating should be five or more.
No proceedings of any appeal, review or revision are pending on any of the issues, which form the basis of the refund.

Revised registration Rules

The key provisions of revised registration rules include the follows:

SEZ units or developers are compelled to obtain the registration as a separate business vertical. This leads to an increase in the compliance of the taxpayers that would eventually increase under the GST regime.
Provisions are provided for obtaining registration. This is to a person who is supplying OIDAR services from a place outside India to a non-taxable online recipient. A new separate registration form in – FORM GST REG-09A has to be submitted by the person who provides the aforementioned services.
Provisions are also provided to know when the registration is liable to be cancelled in necessary situations. It is covers a situation where a person issues invoice without the supply of goods or services. This was included as a counter to cancel the registration of the individuals who are indulged in fraudulent transactions.

Revised payment Rules

The procedural aspects of the revised payment rules include:

TRANACTIONS IN TAX LIABILITY LEDGER
This includes payment of tax, interest, penalty, late fee and any other amount under GST

TRANSACTIONS IN ELECTRONIC CREDIT LEDGER
This includes payment of tax liability through ITC, Filing refund of accumulated ITC

TRANSACTIONS IN ELECTRONIC CASH LEDGER
This includes Deposit of cash, payment of output tax liability, interest, penalty, or any other amounts through cash.

The pre-requisite of registering credit or debit card with the common GST Portal for making payments has been excluded. In case of discrepancy in the electronic credit ledger, the assesses may convey the same to the jurisdictional officer through a Common portal.

Revised return Rules