What is Valuation of Supply Under GST?
Goods and Services Tax will be charged on the value of supply made. The new law has provided various rules which can be referred to for determining the value of supply on which GST has to be charged. In simple words, these rules will help in determining the charging value for GST.
Analysis of Valuation Rules for Supply
Valuation Rules have recently been released and are now open for public comment. These rules are currently hosted on CBEC’s portal and you can access them here. These rules are going to impact all the businesses. To make it easier for our readers, we have come up with our analysis of these valuation rules.
All possible scenario wherein valuation is required are categorized under seven different heads. These heads are:
Example will include cases when a buyer gives another good in exchange of partial consideration and barter.
Example will include when goods or services are supplied to related persons or entities which have separate registration but common control.
Specific cases when goods or services are supplied between Principal and his agent. There may not be a value-addition but these cases will fall under the definition of supply.
This valuation method provides valuation on the basis of the cost of manufacture or cost of acquisition.
Any other method which can be fairly justified.
6. Determination of value in respect of certain supplies.
Specific cases such as Foreign Currency Convertor, Life Insurance Business are covered under this head.
7. Value of Supply of Service in the case of a pure agent.
This valuation rule will apply to exclusive Principal-Agent related cases.
Most of these valuation rules are case specific, the all powerful GST council has also listed up certain businesses such as the sale of foreign currency and life insurance business etc and their specific valuation rules (Under clause 6 above).
We will publish a series of articles and cover all the valuation rules as comprehensively as possible.