Cases where Consideration is Not Wholly in Money
Businesses operate in a dynamic model and we have witnessed innovative schemes wherein a buyer is required to pay the partial amount in cash and the rest in kind, such as when exchanging used goods for a new product.
As a general principal, value of supply will be the amount of consideration received in money from the buyer. However, there can be cases when partial consideration is in money and the rest` is in kind. In such scenario, the value of supply shall be:
- Open Market Value of such supply. OMV will be the amount which is fairly available in open market.
- If the open market value is not available, the value of supply will be the sum of the total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time of supply. In simple words the monetary value of partial consideration will be added to monetary consideration, to sum up to total consideration.
- If the value is not determinable under the points above, the value of supply of goods or service or both will be equivalent to that of like kind and quantity. Here the taxable person can refer to similar goods or services or both for determining the value of supply.
- If the value is not determinable under all the above clause, the value shall be the sum total of consideration in money and such further amount of money that is equivalent to consideration not in money as determined on the basis of Cost Method or Residual Method.
- Where a new TV is supplied for Rs. 20,000 along with the exchange of an old TV and if the price of the new TV without exchange is Rs. 24,000 the open market value of the new TV is Rs. 24,000.
- Where a laptop is supplied for Rs. 40,000 along with a barter of printer that is manufactured by the recipient and the value of the printer known at the time of supply is Rs. 4,000 but the open market value of the laptop is not known, the value of the supply of laptop is Rs. 44,000.