Page 30 - Chap24Computation of GST

Ü However as per Section 7(1)(c) read with Schedule I, supply of goods between 'related persons'

made in the course or furtherance of business qualifies as supply even if made without
consideration.
Ü Furthermore, value of supply of goods between related persons (other than through an agent) is
determined as per rule 28. Accordingly, the value of supply of goods between related persons
will be determined as follows:

a) the open market value of such supply
b) if open market value is not available, the value of supply of goods or services of like kind and
quality

c) if value cannot be determined under the above methods, it must be worked out based on the
cost of the supply plus 10% mark-up or by other reasonable means, in that sequence.
Ü However, where the goods are intended for further supply as such by the recipient, the value
shall, at the option of the supplier, be an amount equivalent to 90% of the price charged for the
supply of goods of like kind and quality by the recipient to his unrelated customer.

Ü Further, 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 the goods.
Ü Open market value of the goods in not available in the given case. Further, since M/s.
Equilibrium Sales is not eligible for full input tax credit, value declared in the invoice cannot be

deemed to be the open market value of the goods. Since M/s. Equilibrium Sales further supplies
the goods, value of the goods will be lower of:
a) Value of supply of goods or services of like kind and quality, i.e. ₹ 7,75,000 or
b) 90% of the price charged for the supply of goods of like kind and quality by M/s. Equilibrium

Sales to its unrelated customer, i.e. ₹ 6,88,500 [₹7,65,000 × 90%].
Ü Thus, the value of supply, in the given case, will be ₹ 6,88,500.
(ii) Ü As per section 7(1)(c) read with Schedule I to the CGST Act, 2017, An activity/transaction

qualifies as supply under GST only if it is undertaken for a consideration and is in
course/furtherance of business.
Ü However, supply of goods by a principal to his agent where the agent undertakes to supply such
goods on behalf of the principal is considered as supply even if made without consideration
provided the invoice for further supply is issued by the agent in his own name.

Ü Where the invoice is issued by the agent to the customer in the name of the principal, such agent
is not an agent as per Schedule I.
Ü Since M/s. Paridhi Sales sells the goods under the invoice issued in the name of Retail Showroom
at Ahmedabad, it is not an agent as per Schedule I.

Ü Resultantly, transfer of goods by Retail Showroom at Ahmedabad to M/s. Paridhi Sales does
not qualify as supply since it is made without consideration.
Ü Further, since M/s. Dhara Enterprises sells the goods under the invoice issued in its own name, it
falls within the purview of an agent as per Schedule I.

Ü Resultantly, transfer of goods by Retail Showroom at Ahmedabad to M/s. Dhara Enterprises
qualifies as supply even though it is made without consideration.
Ü Value of supply of goods made through an agent is determined as per rule 29.
Ü Accordingly, the value of supply of goods between the principal and his agent is the open market

value of the goods being supplied, or at the option of the supplier, is 90% of the price charged for

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