ICAI Notes: Value of Supply | Taxation for CA Intermediate PDF Download

 Page 1


LEARNING OUTCOMES 
    
 
CHAPTER 
7 
 
 
 
 
VALUE OF SUPPLY 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified.  Examples/illustrations/Questions and Answers given in the 
Chapter are based on the position of GST law existing as on 30.04.2023. 
 
 
 
After studying this Chapter, you will be able to-  
? comprehend what constitutes the value of a taxable supply 
of goods / services when the supply is made to an unrelated 
person and price is the sole consideration for the supply  
? identify the various inclusions in/exclusions from the value of 
supply  
? pinpoint the situations when discount will be included /not 
included in the value of supply  
? ascertain who are related persons  
? compute the value of taxable supply when price is the sole 
consideration for the supply and the supplier and recipient 
are not related 
  
Page 2


LEARNING OUTCOMES 
    
 
CHAPTER 
7 
 
 
 
 
VALUE OF SUPPLY 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified.  Examples/illustrations/Questions and Answers given in the 
Chapter are based on the position of GST law existing as on 30.04.2023. 
 
 
 
After studying this Chapter, you will be able to-  
? comprehend what constitutes the value of a taxable supply 
of goods / services when the supply is made to an unrelated 
person and price is the sole consideration for the supply  
? identify the various inclusions in/exclusions from the value of 
supply  
? pinpoint the situations when discount will be included /not 
included in the value of supply  
? ascertain who are related persons  
? compute the value of taxable supply when price is the sole 
consideration for the supply and the supplier and recipient 
are not related 
  
  
 
GOODS AND SERVICES TAX  
 
7.2 
 
 
 
1. INTRODUCTION 
GST is payable (i) on supply of goods or services 
or both for a consideration in the course of or 
furtherance of business; (ii) on certain supplies 
made without a consideration as specified in 
Schedule I to the CGST Act.  
As GST is an ad valorem levy, i.e. it is levied as a 
percentage of the value of supply of goods or services or both, it becomes important 
to know how to arrive at the value on which tax is to be paid.  Provisions relating to 
‘value of supply’ set out the mechanism to compute such value basis on which CGST 
and SGST/UTGST (intra-State supply), or IGST (inter-State supply) should be paid.   
Section 15 of the CGST Act supplemented with CGST rules given under Chapter IV of 
the CGST Rules: Determination of Value
1
 prescribes the provisions for determining the 
value of supply of goods and services.  There are common provisions for determining 
the value of the supply of goods and services. 
Sub-section (1) of section 15 provides the mechanism for determining the value of a 
supply which is made between unrelated persons and when price and only the price 
is the sole consideration for the supply.  When value cannot be determined under 
section 15(1) as also in certain specific cases, the same is determined using Chapter IV: 
Determination of Value of Supply of CGST Rules.  
 
1
 Chapter IV: Determination of Value of Supply of the CGST Rules will be discussed at the Final 
level.   
VALUE OF SUPPLY 
Value of supply made 
to unrelated person 
with price as the sole 
consideration 
Inclusions 
in/exclusions from 
value of supply  
Discount 
CHAPTER OVERVIEW 
 
Page 3


LEARNING OUTCOMES 
    
 
CHAPTER 
7 
 
 
 
 
VALUE OF SUPPLY 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified.  Examples/illustrations/Questions and Answers given in the 
Chapter are based on the position of GST law existing as on 30.04.2023. 
 
 
 
After studying this Chapter, you will be able to-  
? comprehend what constitutes the value of a taxable supply 
of goods / services when the supply is made to an unrelated 
person and price is the sole consideration for the supply  
? identify the various inclusions in/exclusions from the value of 
supply  
? pinpoint the situations when discount will be included /not 
included in the value of supply  
? ascertain who are related persons  
? compute the value of taxable supply when price is the sole 
consideration for the supply and the supplier and recipient 
are not related 
  
  
 
GOODS AND SERVICES TAX  
 
7.2 
 
 
 
1. INTRODUCTION 
GST is payable (i) on supply of goods or services 
or both for a consideration in the course of or 
furtherance of business; (ii) on certain supplies 
made without a consideration as specified in 
Schedule I to the CGST Act.  
As GST is an ad valorem levy, i.e. it is levied as a 
percentage of the value of supply of goods or services or both, it becomes important 
to know how to arrive at the value on which tax is to be paid.  Provisions relating to 
‘value of supply’ set out the mechanism to compute such value basis on which CGST 
and SGST/UTGST (intra-State supply), or IGST (inter-State supply) should be paid.   
Section 15 of the CGST Act supplemented with CGST rules given under Chapter IV of 
the CGST Rules: Determination of Value
1
 prescribes the provisions for determining the 
value of supply of goods and services.  There are common provisions for determining 
the value of the supply of goods and services. 
Sub-section (1) of section 15 provides the mechanism for determining the value of a 
supply which is made between unrelated persons and when price and only the price 
is the sole consideration for the supply.  When value cannot be determined under 
section 15(1) as also in certain specific cases, the same is determined using Chapter IV: 
Determination of Value of Supply of CGST Rules.  
 
1
 Chapter IV: Determination of Value of Supply of the CGST Rules will be discussed at the Final 
level.   
VALUE OF SUPPLY 
Value of supply made 
to unrelated person 
with price as the sole 
consideration 
Inclusions 
in/exclusions from 
value of supply  
Discount 
CHAPTER OVERVIEW 
 
 
 
VALUE OF SUPPLY 
 
 
7.3 
 
2. RELEVANT DEFINITIONS 
 Agent: means a person, including a factor, broker, commission agent, arhatia, 
del credere agent, an auctioneer or any other mercantile agent, by whatever 
name called, who carries on the business of supply or receipt of goods or services 
or both on behalf of another [Section 2(5)].   
 
 Cess: shall have the same meaning as assigned to it in the Goods and Services 
Tax (Compensation to States) Act [Section 2(22)]. 
 Consideration: in relation to the supply of goods or services or both includes – 
(a) any payment made or to be made, whether in money or otherwise, in 
respect of, in response to, or for the inducement of, the supply of 
goods or services or both, whether by the recipient or by any other 
person but shall not include any subsidy given by the Central 
Government or a State Government;  
Provisions of value of supply under CGST Act have also been made applicable 
to IGST Act vide section 20 of the IGST Act.  
AGENT 
Factor 
Broker 
Commission agent 
Arhatia 
Del Credre agent 
Auctioneer 
Mercantile agent 
Who 
carries on 
business 
of supply 
of goods 
and/or 
services  
On behalf 
of 
another 
Page 4


LEARNING OUTCOMES 
    
 
CHAPTER 
7 
 
 
 
 
VALUE OF SUPPLY 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified.  Examples/illustrations/Questions and Answers given in the 
Chapter are based on the position of GST law existing as on 30.04.2023. 
 
 
 
After studying this Chapter, you will be able to-  
? comprehend what constitutes the value of a taxable supply 
of goods / services when the supply is made to an unrelated 
person and price is the sole consideration for the supply  
? identify the various inclusions in/exclusions from the value of 
supply  
? pinpoint the situations when discount will be included /not 
included in the value of supply  
? ascertain who are related persons  
? compute the value of taxable supply when price is the sole 
consideration for the supply and the supplier and recipient 
are not related 
  
  
 
GOODS AND SERVICES TAX  
 
7.2 
 
 
 
1. INTRODUCTION 
GST is payable (i) on supply of goods or services 
or both for a consideration in the course of or 
furtherance of business; (ii) on certain supplies 
made without a consideration as specified in 
Schedule I to the CGST Act.  
As GST is an ad valorem levy, i.e. it is levied as a 
percentage of the value of supply of goods or services or both, it becomes important 
to know how to arrive at the value on which tax is to be paid.  Provisions relating to 
‘value of supply’ set out the mechanism to compute such value basis on which CGST 
and SGST/UTGST (intra-State supply), or IGST (inter-State supply) should be paid.   
Section 15 of the CGST Act supplemented with CGST rules given under Chapter IV of 
the CGST Rules: Determination of Value
1
 prescribes the provisions for determining the 
value of supply of goods and services.  There are common provisions for determining 
the value of the supply of goods and services. 
Sub-section (1) of section 15 provides the mechanism for determining the value of a 
supply which is made between unrelated persons and when price and only the price 
is the sole consideration for the supply.  When value cannot be determined under 
section 15(1) as also in certain specific cases, the same is determined using Chapter IV: 
Determination of Value of Supply of CGST Rules.  
 
1
 Chapter IV: Determination of Value of Supply of the CGST Rules will be discussed at the Final 
level.   
VALUE OF SUPPLY 
Value of supply made 
to unrelated person 
with price as the sole 
consideration 
Inclusions 
in/exclusions from 
value of supply  
Discount 
CHAPTER OVERVIEW 
 
 
 
VALUE OF SUPPLY 
 
 
7.3 
 
2. RELEVANT DEFINITIONS 
 Agent: means a person, including a factor, broker, commission agent, arhatia, 
del credere agent, an auctioneer or any other mercantile agent, by whatever 
name called, who carries on the business of supply or receipt of goods or services 
or both on behalf of another [Section 2(5)].   
 
 Cess: shall have the same meaning as assigned to it in the Goods and Services 
Tax (Compensation to States) Act [Section 2(22)]. 
 Consideration: in relation to the supply of goods or services or both includes – 
(a) any payment made or to be made, whether in money or otherwise, in 
respect of, in response to, or for the inducement of, the supply of 
goods or services or both, whether by the recipient or by any other 
person but shall not include any subsidy given by the Central 
Government or a State Government;  
Provisions of value of supply under CGST Act have also been made applicable 
to IGST Act vide section 20 of the IGST Act.  
AGENT 
Factor 
Broker 
Commission agent 
Arhatia 
Del Credre agent 
Auctioneer 
Mercantile agent 
Who 
carries on 
business 
of supply 
of goods 
and/or 
services  
On behalf 
of 
another 
  
 
GOODS AND SERVICES TAX  
 
7.4 
(b) the monetary value of any act or forbearance, in respect of, in 
response to, or for the inducement of, the supply of goods or services 
or both, whether by the recipient or by any other person but shall not 
include any subsidy given by the Central Government or a State 
Government; 
Provided that a deposit given in respect of the supply of goods or services 
or both shall not be considered as payment made for such supply unless the 
supplier applies such deposit as consideration for the said supply [Section 
2(31)]. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Person includes- 
(a) an individual; 
(b) a Hindu Undivided Family; 
(c) a company; 
(d) a firm; 
CONSIDERATION 
Payment in money 
or otherwise for the 
supply 
Monetary value of 
any act or 
forbearance for the 
supply 
By recipient or 
any other 
person 
Deposit to be 
considered as payment 
When the supplier 
applies such deposit as 
consideration for the 
said supply 
Excluding subsidy given 
by Central/ a State 
Government 
ONLY 
 
Page 5


LEARNING OUTCOMES 
    
 
CHAPTER 
7 
 
 
 
 
VALUE OF SUPPLY 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified.  Examples/illustrations/Questions and Answers given in the 
Chapter are based on the position of GST law existing as on 30.04.2023. 
 
 
 
After studying this Chapter, you will be able to-  
? comprehend what constitutes the value of a taxable supply 
of goods / services when the supply is made to an unrelated 
person and price is the sole consideration for the supply  
? identify the various inclusions in/exclusions from the value of 
supply  
? pinpoint the situations when discount will be included /not 
included in the value of supply  
? ascertain who are related persons  
? compute the value of taxable supply when price is the sole 
consideration for the supply and the supplier and recipient 
are not related 
  
  
 
GOODS AND SERVICES TAX  
 
7.2 
 
 
 
1. INTRODUCTION 
GST is payable (i) on supply of goods or services 
or both for a consideration in the course of or 
furtherance of business; (ii) on certain supplies 
made without a consideration as specified in 
Schedule I to the CGST Act.  
As GST is an ad valorem levy, i.e. it is levied as a 
percentage of the value of supply of goods or services or both, it becomes important 
to know how to arrive at the value on which tax is to be paid.  Provisions relating to 
‘value of supply’ set out the mechanism to compute such value basis on which CGST 
and SGST/UTGST (intra-State supply), or IGST (inter-State supply) should be paid.   
Section 15 of the CGST Act supplemented with CGST rules given under Chapter IV of 
the CGST Rules: Determination of Value
1
 prescribes the provisions for determining the 
value of supply of goods and services.  There are common provisions for determining 
the value of the supply of goods and services. 
Sub-section (1) of section 15 provides the mechanism for determining the value of a 
supply which is made between unrelated persons and when price and only the price 
is the sole consideration for the supply.  When value cannot be determined under 
section 15(1) as also in certain specific cases, the same is determined using Chapter IV: 
Determination of Value of Supply of CGST Rules.  
 
1
 Chapter IV: Determination of Value of Supply of the CGST Rules will be discussed at the Final 
level.   
VALUE OF SUPPLY 
Value of supply made 
to unrelated person 
with price as the sole 
consideration 
Inclusions 
in/exclusions from 
value of supply  
Discount 
CHAPTER OVERVIEW 
 
 
 
VALUE OF SUPPLY 
 
 
7.3 
 
2. RELEVANT DEFINITIONS 
 Agent: means a person, including a factor, broker, commission agent, arhatia, 
del credere agent, an auctioneer or any other mercantile agent, by whatever 
name called, who carries on the business of supply or receipt of goods or services 
or both on behalf of another [Section 2(5)].   
 
 Cess: shall have the same meaning as assigned to it in the Goods and Services 
Tax (Compensation to States) Act [Section 2(22)]. 
 Consideration: in relation to the supply of goods or services or both includes – 
(a) any payment made or to be made, whether in money or otherwise, in 
respect of, in response to, or for the inducement of, the supply of 
goods or services or both, whether by the recipient or by any other 
person but shall not include any subsidy given by the Central 
Government or a State Government;  
Provisions of value of supply under CGST Act have also been made applicable 
to IGST Act vide section 20 of the IGST Act.  
AGENT 
Factor 
Broker 
Commission agent 
Arhatia 
Del Credre agent 
Auctioneer 
Mercantile agent 
Who 
carries on 
business 
of supply 
of goods 
and/or 
services  
On behalf 
of 
another 
  
 
GOODS AND SERVICES TAX  
 
7.4 
(b) the monetary value of any act or forbearance, in respect of, in 
response to, or for the inducement of, the supply of goods or services 
or both, whether by the recipient or by any other person but shall not 
include any subsidy given by the Central Government or a State 
Government; 
Provided that a deposit given in respect of the supply of goods or services 
or both shall not be considered as payment made for such supply unless the 
supplier applies such deposit as consideration for the said supply [Section 
2(31)]. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Person includes- 
(a) an individual; 
(b) a Hindu Undivided Family; 
(c) a company; 
(d) a firm; 
CONSIDERATION 
Payment in money 
or otherwise for the 
supply 
Monetary value of 
any act or 
forbearance for the 
supply 
By recipient or 
any other 
person 
Deposit to be 
considered as payment 
When the supplier 
applies such deposit as 
consideration for the 
said supply 
Excluding subsidy given 
by Central/ a State 
Government 
ONLY 
 
 
 
VALUE OF SUPPLY 
 
 
7.5 
(e) a Limited Liability Partnership; 
(f) an association of persons or a body of individuals, whether 
incorporated or not, in India or outside India; 
(g) any corporation established by or under any Central Act, State Act or 
Provincial Act or a Government company as defined in section 2(45) 
of the Companies Act, 2013; 
(h) any body corporate incorporated by or under the laws of a country 
outside India; 
(i) a co-operative society registered under any law relating to 
cooperative societies; 
(j) a local authority; 
(k) Central Government or a State Government; 
(l) society as defined under the Societies Registration Act, 1860; 
(m) trust; and 
(n) every artificial juridical person, not falling within any of the above 
[Section 2(84)]. 
 Money: means the Indian legal tender or any foreign currency, cheque, 
promissory note, bill of exchange, letter of credit, draft, pay order, traveller 
cheque, money order, postal or electronic remittance or any other instrument 
recognised by the Reserve Bank of India when used as a consideration to 
settle an obligation or exchange with Indian legal tender of another 
denomination but shall not include any currency that is held for its 
numismatic value [Section 2(75)].