In our previous articles, we discussed the various methods of valuation of supply under GST. These rules need to be followed in case a specific scenario is applicable, for example in the case of non-monetary consideration or when a supply is made from principal to an agent or vice versa. In spite of these rules, if a registered person supplying goods or services under GST in still not able to determine the value, he may choose to follow the Residual Method of Valuation.
As per the residual method, where the value of supply of goods or services or both cannot be determined under the cost method, the same shall be determined using reasonable means consistent with the principles and general provisions of the Goods and Services Tax law. A simple interpretation of this rule suggests that supplier can use any method to determine the value of supply under GST, provided such method is justifiable in the case of inquiry. The registered taxable person should not exploit this method to displace the GST liability as the penal provisions are strict under the new indirect tax regime.
One example of the residual method is valuation on the basis of per unit when the cost of manufacturing can not be determined in principle. The number of man hours required to complete a job can be another example of such valuation method.