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 Page 1


Chapter ___ 
Determination of Value of Supply 
 
1. Value of supply of goods or services where the consideration is not wholly in money 
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply 
shall,  
(a) be the open market value of such supply; 
(b) if open market value is not available, be the sum 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; 
(c) if the value of supply  is not determinable under clause (a) or clause (b), be the value of 
supply of goods or services or both of like kind and quality;  
(d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of 
consideration in money and such further amount in money that is equivalent to 
consideration not in money as determined by application of rule 4 or rule 5 in that order.   
Illustration: 
(1) Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and if the 
price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs 24000. 
(2) Where a laptop is supplied for Rs.40000 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.4000 but the open market value of 
the laptop is not known, the value of the supply of laptop is Rs.44000. 
2. Value of supply of goods or services or both between distinct or related persons, other than through 
an agent  
The value of the supply of goods or services or both between distinct persons as specified in sub-section 
(4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made 
through an agent, 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), be the value as determined by application of 
rule 4 or rule 5, in that order: 
Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be 
deemed to be the open market value of goods or services. 
3.  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 being supplied, or at the option of the supplier, be 
ninety percent of the 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; 
Page 2


Chapter ___ 
Determination of Value of Supply 
 
1. Value of supply of goods or services where the consideration is not wholly in money 
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply 
shall,  
(a) be the open market value of such supply; 
(b) if open market value is not available, be the sum 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; 
(c) if the value of supply  is not determinable under clause (a) or clause (b), be the value of 
supply of goods or services or both of like kind and quality;  
(d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of 
consideration in money and such further amount in money that is equivalent to 
consideration not in money as determined by application of rule 4 or rule 5 in that order.   
Illustration: 
(1) Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and if the 
price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs 24000. 
(2) Where a laptop is supplied for Rs.40000 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.4000 but the open market value of 
the laptop is not known, the value of the supply of laptop is Rs.44000. 
2. Value of supply of goods or services or both between distinct or related persons, other than through 
an agent  
The value of the supply of goods or services or both between distinct persons as specified in sub-section 
(4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made 
through an agent, 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), be the value as determined by application of 
rule 4 or rule 5, in that order: 
Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be 
deemed to be the open market value of goods or services. 
3.  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 being supplied, or at the option of the supplier, be 
ninety percent of the 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; 
Illustration: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of 
like kind and quality in subsequent supplies at a price of Rs.5000 per quintal on the day of supply. Another 
independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of 
Rs.4550 per quintal. The value of the supply made by the principal shall be Rs.4550 per quintal or where 
he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.          
(b)     where the value of a supply is not determinable under clause (a), the same shall be determined 
by application of rule 4 or rule 5 in that order. 
4. Value of supply of goods or services or both based on cost   
Where the value of a supply of goods or services or both is not determinable by any of the preceding 
rules, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of 
acquisition of such goods or cost of provision of such services. 
5.       Residual method for determination of value of supply of goods or services or both  
  Where the value of supply of goods or services or both cannot be determined under rules 1 to 4, the 
same shall be determined using reasonable means consistent with the principles and general provisions of 
section 15 and these rules:  
Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 4. 
6. Determination of value in respect of certain supplies 
(1)   Notwithstanding anything contained in the Act or in these rules, the value in respect of supplies 
specified below shall be determined in the manner provided hereinafter. 
(2) The value of supply of services in relation to purchase or sale of foreign currency, including money 
changing, shall be determined by the supplier of service in the following manner:-   
(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:  
Provided that 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:  
Provided further that 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. 
Provided also that 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) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, 
subject to a minimum amount of two hundred and fifty rupees;  
(ii) one thousand rupees and half of a  per cent. of the gross amount of currency exchanged for an 
amount exceeding one lakh rupees and up to ten lakh rupees; and 
Page 3


Chapter ___ 
Determination of Value of Supply 
 
1. Value of supply of goods or services where the consideration is not wholly in money 
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply 
shall,  
(a) be the open market value of such supply; 
(b) if open market value is not available, be the sum 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; 
(c) if the value of supply  is not determinable under clause (a) or clause (b), be the value of 
supply of goods or services or both of like kind and quality;  
(d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of 
consideration in money and such further amount in money that is equivalent to 
consideration not in money as determined by application of rule 4 or rule 5 in that order.   
Illustration: 
(1) Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and if the 
price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs 24000. 
(2) Where a laptop is supplied for Rs.40000 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.4000 but the open market value of 
the laptop is not known, the value of the supply of laptop is Rs.44000. 
2. Value of supply of goods or services or both between distinct or related persons, other than through 
an agent  
The value of the supply of goods or services or both between distinct persons as specified in sub-section 
(4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made 
through an agent, 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), be the value as determined by application of 
rule 4 or rule 5, in that order: 
Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be 
deemed to be the open market value of goods or services. 
3.  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 being supplied, or at the option of the supplier, be 
ninety percent of the 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; 
Illustration: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of 
like kind and quality in subsequent supplies at a price of Rs.5000 per quintal on the day of supply. Another 
independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of 
Rs.4550 per quintal. The value of the supply made by the principal shall be Rs.4550 per quintal or where 
he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.          
(b)     where the value of a supply is not determinable under clause (a), the same shall be determined 
by application of rule 4 or rule 5 in that order. 
4. Value of supply of goods or services or both based on cost   
Where the value of a supply of goods or services or both is not determinable by any of the preceding 
rules, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of 
acquisition of such goods or cost of provision of such services. 
5.       Residual method for determination of value of supply of goods or services or both  
  Where the value of supply of goods or services or both cannot be determined under rules 1 to 4, the 
same shall be determined using reasonable means consistent with the principles and general provisions of 
section 15 and these rules:  
Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 4. 
6. Determination of value in respect of certain supplies 
(1)   Notwithstanding anything contained in the Act or in these rules, the value in respect of supplies 
specified below shall be determined in the manner provided hereinafter. 
(2) The value of supply of services in relation to purchase or sale of foreign currency, including money 
changing, shall be determined by the supplier of service in the following manner:-   
(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:  
Provided that 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:  
Provided further that 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. 
Provided also that 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) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, 
subject to a minimum amount of two hundred and fifty rupees;  
(ii) one thousand rupees and half of a  per cent. of the gross amount of currency exchanged for an 
amount exceeding one lakh rupees and up to ten lakh rupees; and 
(iii) five thousand rupees  and one tenth of a  per cent. of the gross amount of currency exchanged 
for an amount exceeding ten lakh rupees, subject to maximum amount of  sixty thousand rupees. 
(3)  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 five percent. of the basic fare in the 
case of domestic bookings, and at the rate of ten per cent. of the basic fare in the case of international 
bookings of passage for travel by air.  
Explanation - For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare 
on which commission is normally paid to the air travel agent by the airline. 
(4)  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; or 
(c)   in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year 
and twelve and a half per cent. of the premium charged from policy holder in subsequent years: 
Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy 
holder is only towards the risk cover in life insurance. 
 
(5) 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.  
 (6) 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. 
(7)The value of taxable services provided by such class of service providers as may be notified by the 
Government on the recommendations of the Council as referred to in Entry 2 of Schedule I between distinct 
persons as referred to in section 25, other than those where input tax credit is not available under sub-section 
(5) of section 17, shall be deemed to be NIL. 
7.   Value of supply of services in case of pure agent 
Notwithstanding anything contained in these rules, the expenditure or costs incurred by the supplier as a 
pure agent of the recipient of supply of services shall be excluded from the value of supply, if all the 
following conditions are satisfied, namely:- 
(i) the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third 
party for the services procured as the contract for supply made by third party is between third party and the 
recipient of supply;  
Page 4


Chapter ___ 
Determination of Value of Supply 
 
1. Value of supply of goods or services where the consideration is not wholly in money 
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply 
shall,  
(a) be the open market value of such supply; 
(b) if open market value is not available, be the sum 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; 
(c) if the value of supply  is not determinable under clause (a) or clause (b), be the value of 
supply of goods or services or both of like kind and quality;  
(d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of 
consideration in money and such further amount in money that is equivalent to 
consideration not in money as determined by application of rule 4 or rule 5 in that order.   
Illustration: 
(1) Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and if the 
price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs 24000. 
(2) Where a laptop is supplied for Rs.40000 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.4000 but the open market value of 
the laptop is not known, the value of the supply of laptop is Rs.44000. 
2. Value of supply of goods or services or both between distinct or related persons, other than through 
an agent  
The value of the supply of goods or services or both between distinct persons as specified in sub-section 
(4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made 
through an agent, 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), be the value as determined by application of 
rule 4 or rule 5, in that order: 
Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be 
deemed to be the open market value of goods or services. 
3.  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 being supplied, or at the option of the supplier, be 
ninety percent of the 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; 
Illustration: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of 
like kind and quality in subsequent supplies at a price of Rs.5000 per quintal on the day of supply. Another 
independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of 
Rs.4550 per quintal. The value of the supply made by the principal shall be Rs.4550 per quintal or where 
he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.          
(b)     where the value of a supply is not determinable under clause (a), the same shall be determined 
by application of rule 4 or rule 5 in that order. 
4. Value of supply of goods or services or both based on cost   
Where the value of a supply of goods or services or both is not determinable by any of the preceding 
rules, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of 
acquisition of such goods or cost of provision of such services. 
5.       Residual method for determination of value of supply of goods or services or both  
  Where the value of supply of goods or services or both cannot be determined under rules 1 to 4, the 
same shall be determined using reasonable means consistent with the principles and general provisions of 
section 15 and these rules:  
Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 4. 
6. Determination of value in respect of certain supplies 
(1)   Notwithstanding anything contained in the Act or in these rules, the value in respect of supplies 
specified below shall be determined in the manner provided hereinafter. 
(2) The value of supply of services in relation to purchase or sale of foreign currency, including money 
changing, shall be determined by the supplier of service in the following manner:-   
(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:  
Provided that 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:  
Provided further that 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. 
Provided also that 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) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, 
subject to a minimum amount of two hundred and fifty rupees;  
(ii) one thousand rupees and half of a  per cent. of the gross amount of currency exchanged for an 
amount exceeding one lakh rupees and up to ten lakh rupees; and 
(iii) five thousand rupees  and one tenth of a  per cent. of the gross amount of currency exchanged 
for an amount exceeding ten lakh rupees, subject to maximum amount of  sixty thousand rupees. 
(3)  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 five percent. of the basic fare in the 
case of domestic bookings, and at the rate of ten per cent. of the basic fare in the case of international 
bookings of passage for travel by air.  
Explanation - For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare 
on which commission is normally paid to the air travel agent by the airline. 
(4)  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; or 
(c)   in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year 
and twelve and a half per cent. of the premium charged from policy holder in subsequent years: 
Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy 
holder is only towards the risk cover in life insurance. 
 
(5) 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.  
 (6) 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. 
(7)The value of taxable services provided by such class of service providers as may be notified by the 
Government on the recommendations of the Council as referred to in Entry 2 of Schedule I between distinct 
persons as referred to in section 25, other than those where input tax credit is not available under sub-section 
(5) of section 17, shall be deemed to be NIL. 
7.   Value of supply of services in case of pure agent 
Notwithstanding anything contained in these rules, the expenditure or costs incurred by the supplier as a 
pure agent of the recipient of supply of services shall be excluded from the value of supply, if all the 
following conditions are satisfied, namely:- 
(i) the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third 
party for the services procured as the contract for supply made by third party is between third party and the 
recipient of supply;  
(ii) the recipient of supply uses the services so procured by the supplier service provider in his capacity 
as pure agent of the recipient of  supply;  
(iii) the recipient of  supply is liable to make payment to the third party;  
(iv) the recipient of supply authorises the supplier  to make payment on his behalf;  
(v) the recipient of supply knows that the services for which payment has been made by the supplier 
shall be provided by the third party;  
(vi) 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 the recipient of service;  
(vii) the supplier recovers from the recipient of supply only such amount as has been paid by him to the 
third party; and  
(viii) 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.  
Explanation . - For the purposes of this rule, “pure agent” means a person who - 
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur 
expenditure or costs in the course of supply of goods or services or both;  
(b) neither intends to hold nor holds any title to the goods or services or both so procured or provided 
as pure agent of the recipient of supply;  
(c) does not use for his own interest such goods or services so procured; and  
(d) receives only the actual amount incurred to procure such goods or services.  
Illustration. Corporate services firm A is engaged to handle the legal work pertaining to the incorporation 
of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the 
name of the company paid to Registrar of the Companies. The fees charged by the Registrar of the 
companies registration and approval of the name are compulsorily levied on B. A is merely acting as a pure 
agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part 
of the value of supply made by A to B.     
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 on the date when point of 
taxation arises in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act. 
 
Explanation.- For the purposes of this Chapter,-  
(a) “open market value” of a supply of goods or services or both means the full value in money, 
excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person 
in a transaction, where the supplier and the recipient 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.  
(b)  “supply of goods or services or both of like kind and quality” means any other supply of goods or 
services or both made under similar circumstances that, in respect of the 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. 
 
 
******** 
Page 5


Chapter ___ 
Determination of Value of Supply 
 
1. Value of supply of goods or services where the consideration is not wholly in money 
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply 
shall,  
(a) be the open market value of such supply; 
(b) if open market value is not available, be the sum 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; 
(c) if the value of supply  is not determinable under clause (a) or clause (b), be the value of 
supply of goods or services or both of like kind and quality;  
(d) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of 
consideration in money and such further amount in money that is equivalent to 
consideration not in money as determined by application of rule 4 or rule 5 in that order.   
Illustration: 
(1) Where a new phone is supplied for Rs.20000 along with the exchange of an old phone and if the 
price of the new phone without exchange is Rs.24000, the open market value of the new phone is Rs 24000. 
(2) Where a laptop is supplied for Rs.40000 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.4000 but the open market value of 
the laptop is not known, the value of the supply of laptop is Rs.44000. 
2. Value of supply of goods or services or both between distinct or related persons, other than through 
an agent  
The value of the supply of goods or services or both between distinct persons as specified in sub-section 
(4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made 
through an agent, 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), be the value as determined by application of 
rule 4 or rule 5, in that order: 
Provided where the recipient is eligible for full input tax credit, the value declared in the invoice shall be 
deemed to be the open market value of goods or services. 
3.  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 being supplied, or at the option of the supplier, be 
ninety percent of the 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; 
Illustration: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of 
like kind and quality in subsequent supplies at a price of Rs.5000 per quintal on the day of supply. Another 
independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of 
Rs.4550 per quintal. The value of the supply made by the principal shall be Rs.4550 per quintal or where 
he exercises the option the value shall be 90% of the Rs.5000 i.e. is Rs.4500 per quintal.          
(b)     where the value of a supply is not determinable under clause (a), the same shall be determined 
by application of rule 4 or rule 5 in that order. 
4. Value of supply of goods or services or both based on cost   
Where the value of a supply of goods or services or both is not determinable by any of the preceding 
rules, the value shall be one hundred and ten percent of the cost of production or manufacture or cost of 
acquisition of such goods or cost of provision of such services. 
5.       Residual method for determination of value of supply of goods or services or both  
  Where the value of supply of goods or services or both cannot be determined under rules 1 to 4, the 
same shall be determined using reasonable means consistent with the principles and general provisions of 
section 15 and these rules:  
Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule 4. 
6. Determination of value in respect of certain supplies 
(1)   Notwithstanding anything contained in the Act or in these rules, the value in respect of supplies 
specified below shall be determined in the manner provided hereinafter. 
(2) The value of supply of services in relation to purchase or sale of foreign currency, including money 
changing, shall be determined by the supplier of service in the following manner:-   
(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:  
Provided that 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:  
Provided further that 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. 
Provided also that 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) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, 
subject to a minimum amount of two hundred and fifty rupees;  
(ii) one thousand rupees and half of a  per cent. of the gross amount of currency exchanged for an 
amount exceeding one lakh rupees and up to ten lakh rupees; and 
(iii) five thousand rupees  and one tenth of a  per cent. of the gross amount of currency exchanged 
for an amount exceeding ten lakh rupees, subject to maximum amount of  sixty thousand rupees. 
(3)  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 five percent. of the basic fare in the 
case of domestic bookings, and at the rate of ten per cent. of the basic fare in the case of international 
bookings of passage for travel by air.  
Explanation - For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare 
on which commission is normally paid to the air travel agent by the airline. 
(4)  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; or 
(c)   in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year 
and twelve and a half per cent. of the premium charged from policy holder in subsequent years: 
Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy 
holder is only towards the risk cover in life insurance. 
 
(5) 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.  
 (6) 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. 
(7)The value of taxable services provided by such class of service providers as may be notified by the 
Government on the recommendations of the Council as referred to in Entry 2 of Schedule I between distinct 
persons as referred to in section 25, other than those where input tax credit is not available under sub-section 
(5) of section 17, shall be deemed to be NIL. 
7.   Value of supply of services in case of pure agent 
Notwithstanding anything contained in these rules, the expenditure or costs incurred by the supplier as a 
pure agent of the recipient of supply of services shall be excluded from the value of supply, if all the 
following conditions are satisfied, namely:- 
(i) the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third 
party for the services procured as the contract for supply made by third party is between third party and the 
recipient of supply;  
(ii) the recipient of supply uses the services so procured by the supplier service provider in his capacity 
as pure agent of the recipient of  supply;  
(iii) the recipient of  supply is liable to make payment to the third party;  
(iv) the recipient of supply authorises the supplier  to make payment on his behalf;  
(v) the recipient of supply knows that the services for which payment has been made by the supplier 
shall be provided by the third party;  
(vi) 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 the recipient of service;  
(vii) the supplier recovers from the recipient of supply only such amount as has been paid by him to the 
third party; and  
(viii) 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.  
Explanation . - For the purposes of this rule, “pure agent” means a person who - 
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur 
expenditure or costs in the course of supply of goods or services or both;  
(b) neither intends to hold nor holds any title to the goods or services or both so procured or provided 
as pure agent of the recipient of supply;  
(c) does not use for his own interest such goods or services so procured; and  
(d) receives only the actual amount incurred to procure such goods or services.  
Illustration. Corporate services firm A is engaged to handle the legal work pertaining to the incorporation 
of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the 
name of the company paid to Registrar of the Companies. The fees charged by the Registrar of the 
companies registration and approval of the name are compulsorily levied on B. A is merely acting as a pure 
agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part 
of the value of supply made by A to B.     
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 on the date when point of 
taxation arises in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act. 
 
Explanation.- For the purposes of this Chapter,-  
(a) “open market value” of a supply of goods or services or both means the full value in money, 
excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person 
in a transaction, where the supplier and the recipient 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.  
(b)  “supply of goods or services or both of like kind and quality” means any other supply of goods or 
services or both made under similar circumstances that, in respect of the 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. 
 
 
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