Section 15 of CGST Act

Value of taxable supply

(1)   The value of a supply of goods or services or both

shall be the transaction value,

which is the price actually paid or payable for the said supply of goods or services or both

where the supplier and the recipient of the supply are not related

and the price is the sole consideration for the supply.

(2)   The value of supply shall include:

     (a)     any taxes, duties, cesses, fees and charges levied under any law for the time being in force

              other than this Act,

 the State Goods and Services Tax Act,

 the Union Territory Goods and Services Tax Act

 and the Goods and Services Tax (Compensation to States) Act,

 if charged separately by the supplier;

Example:

1. Value for payment of IGST, CGST, SGST would not include any cess charged by Central or State Government.

Value for payment of IGST, CGST, SGST will not include Kerala Flood Cess Payable under clause 14 of Kerala Finance Bill, 2019.

1. Value does not include TCS under Income Tax Act.

If amount of invoice is 100 and TCS deducted is Rs. 5, GST is payable on Rs. 100  and not Rs. 95.

(b)     any amount that the supplier is liable to pay

in relation to such supply

but which has been incurred by the recipient of the supply

and not included in the price actually paid or payable for the goods or services or both;

Example:

Contract includes value of material but some material supplied by the recipient and value deducted from bill of supplier.

If there was a contract with customer including value of materials. However, some of the goods was supplied by the customer, the value of goods that are supplied by the customer should not be deducted from the Actual bill. Customer can issue tax invoice in the name of contractor, so that contractor can take ITC of such goods. 

(c)      incidental expenses, including commission and packing,

charged by the supplier

to the recipient of a supply

and any amount charged for anything done by the supplier in respect of the supply of goods or services or both

at the time of,

or before delivery of goods

or supply of services;

Example:

Development charges like design and tooling are includible in value.

(d)      interest or late fee or penalty

for delayed payment of any consideration

for any supply; and

Example:

1. GST on penal interest on EMI

If EMI is not paid within scheduled time, additional interest is charged called penal interest. There are two types of EMI:

1. If the Seller himself grants EMI instalments: If seller himself charge penal interest, it will be part of value of goods and GST will be payable by seller, even if charged separately at rate applicable to sale of goods.
2. If loan is provided by finance company: If loan is granted by finance company to buyer, the seller of goods is out of picture once goods are sold. The buyer will pay penal interest to the finance company in this case, so it is exempt under Sr. No. 27 of Notification No. 12/2017-CT (Rate) dated 28-06-2017.
3. GST on delayed payment charges on supply of electricity.

There is No GST on delayed payment charges on supply of electricity, as electricity is exempt.

1. GST on delayed payment charges recovered from clients by stock broker.

(e)      subsidies directly linked to the price

excluding subsidies provided by the Central Government and State Governments.

          Example:

1. Subsidy payable to supplier by person other than government.

The sugar factory had paid planting subsidy to sugar cane grower(supplier). If factory did not give subsidy, then entire cost is borne by grower himself and would have included the cost in the sale price. So, subsidy given by factory owner should be included in the value of supply.   

1. Subsidy not connected with specific sale not includible.

It may be noted that subsidy that is of general nature which is not connected to sale of any specific goods will not be included in value of supply. 

Explanation:-

For the purposes of this sub-section,

the amount of subsidy

shall be included in the value of supply of the supplier who receives the subsidy.

(3) The value of the supply shall not include any discount which is given––

(a)   before or at the time of the supply if such discount has been duly recorded in

        the invoice issued in respect of such supply; and

(b)    after the supply has been effected, if—

     (i)      such discount is established in terms of an agreement entered into

at or before the time of such supply

and specifically linked to relevant invoices; and

      (ii)     input tax credit as is attributable to the discount on the basis of document issued by the supplier

has been reversed by the recipient of the supply.

Example:

1. Quantity discounts- Buy more, save more – Discounts known before supply

In some cases, discounts are known before supply of goods or services but may be given after supply. Staggered quantity discounts are given based on quantity purchased by recipient. Discounts offered in such case is excluded from value if requirements under section15(3) is fulfilled.

1. ‘Buy one get one free’ or ‘one item free’ offers

It is the case of two or more supplies at a single price, it can be treated as supply of two goods for the price of one. In such cases, rate of tax will depend on whether it is composite supply or mixed supply

(4)    Where the value of the supply of goods or services or both

         cannot be determined under sub-section (1),

         the same shall be determined in such manner as may be

         prescribed.

(5)     Notwithstanding anything contained in sub-section (1) or sub-section (4),

         the value of such supplies

         as may be notified by the Government on the recommendations of the Council

         shall be determined in such manner as may be prescribed.

Explanation.—

For the purposes of this Act,––

(a)    persons shall be deemed to be “related persons” if––

     (i)    such persons are officers or directors of one another’s businesses;

      (ii)   such persons are legally recognised partners in business;

      (iii)   such persons are employer and employee;

      (iv)   any person directly or indirectly owns, controls or holds twenty-five

              per cent or more of the outstanding voting stock or shares of both of them;

       (v)  one of them directly or indirectly controls the other;

       (vi)  both of them are directly or indirectly controlled by a third person;

       (vii)  together they directly or indirectly control a third person; or

       (viii)  they are members of the same family;

(b)    the term “person” also includes legal persons;

(c)      persons who are associated in the business of one another in that

one is the sole agent or sole distributor or sole concessionaire,

howsoever described, of the other,

shall be deemed to be related.

Thanks

CA Rahul Gupta