GST is charged on the taxable value of a supply. So, even if you know the rate (say 18%), you must first decide the value of supply correctly (concept). Exams often ask:
You should be able to:
Valuation matters because:
Value of supply means the amount on which GST is calculated for a particular supply (concept). It is generally based on the price actually paid/payable, but adjusted for specified inclusions/exclusions.
Transaction value is the price actually paid or payable for the supply when supplier and recipient are not related and price is the sole consideration (concept).
In simple words: if it is a normal sale at a genuine price, transaction value is the base.
Transaction value is generally accepted when:
If these conditions are not satisfied, valuation rules/methods may apply.
Access the complete note and unlock all topic-wise content
It's free and takes just 5 seconds
Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the supply of goods and services. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.
Get instant access to notes, practice questions, and more benefits with our mobile app.
Download this note as PDF at no cost
If any AD appears on download click please wait for 30sec till it gets completed and then close it, you will be redirected to pdf/ppt notes page.
GST is charged on the taxable value of a supply. So, even if you know the rate (say 18%), you must first decide the value of supply correctly (concept). Exams often ask:
You should be able to:
Valuation matters because:
Value of supply means the amount on which GST is calculated for a particular supply (concept). It is generally based on the price actually paid/payable, but adjusted for specified inclusions/exclusions.
Transaction value is the price actually paid or payable for the supply when supplier and recipient are not related and price is the sole consideration (concept).
In simple words: if it is a normal sale at a genuine price, transaction value is the base.
Transaction value is generally accepted when:
If these conditions are not satisfied, valuation rules/methods may apply.
Common additions (concept/overview):
At a basic level, exclude:
Discounts can reduce taxable value if properly documented and conditions are met (concept). Practical exam-friendly points:
Write “as per GST rules/conditions” in exams if detailed conditions are out of syllabus.
Assume goods value 50,000. Packing charges 2,000. Discount shown on invoice 1,000. GST rate 18%.
Note: GST is calculated on taxable value; GST itself is not included in value (concept).
Valuation rules may apply when:
If transaction value cannot be used, valuation may be based on (overview):
Start
|
v
Can we use transaction value? (not related + sole consideration)
| Yes
v
Base price (paid/payable)
|
v
Add inclusions (packing/commission/charges etc.)
|
v
Less eligible discounts (properly documented)
|
v
Taxable value -> Apply GST rate -> Tax amount
|
v
If transaction value not acceptable -> apply valuation rules/methods (overview)
From this topic
Any three inclusions (concept/overview):
Write any three items in points/table form.
Discount treatment (basics) (concept):
Write any three clear points.
Value of supply is the taxable value on which GST is computed. Generally, it is based on transaction value (price paid/payable) when parties are not related and price is the sole consideration (concept).
Conclusion: Correct valuation ensures correct GST payment and compliance (concept).