Page 13 - Chapter 6_Value of Supply

Discussion & Conclusion:

1) Ü In the given case, price is not the sole consideration for the supply. Apart from monetary consideration,
the buyer has given some material to the supplier as consideration for such supply
Ü Thus, Value of supply of such goods shall be determined on the basis of Open market value
= ₹ 2,97,360 x 100/118 = ₹ 2,52,000

Ü In this case, Open market value of supply is not available, thus Value of supply will be:
2)
= (₹ 2,95,000 x 100/118) + ₹ 10,000 = ₹ 2,60,000

04: Rule 28: Value of supply of goods or services or both between distinct or related persons, other
than through an agent

Q.11 Rustagi & Co. manufactures customized products at its unit situated and registered in Madhya

Pradesh. Cost of production of 1,000 products for Rustagi & Co. is ₹ 20,00,000.
These products require further processing before sale, and for this purpose products are transferred from its
Madhya Pradesh unit to its another unit situated and registered in Himachal Pradesh. The value declared on
the invoice for such transfer is the cost of production of such products.
The Himachal Pradesh unit, apart from processing its own products, engages in processing of similar
products of other persons who supply the products of the same kind and quality. Thereafter, the Himachal
Pradesh unit sells these processed products to wholesalers. There are no other factories in the neighbouring
area which are engaged in the same business as that of Himachal Pradesh unit.
1,000 units of the products of same kind and quality are supplied to Himachal Pradesh unit, at the time when
goods are sent by Madhya Pradesh unit, by another manufacturer located in Himachal Pradesh.
The ex-factory price of such goods is ₹ 19,00,000. The Himachal Pradesh unit of Rustagi & Co. is eligible for
full ITC. Determine the value of 1000 products supplied by Rustagi & Co. to its Himachal Pradesh unit.
[Study Mat]
Answer:- Legal provision:
Ü As per section 25(4), a person who has obtained more than one registration in one or more State or Union
territory shall be treated as 'distinct persons' for each such registration.
Ü As per Rule 28 of the Valuation Rules 2017, In case of distinct persons or related person, other than where the
supply is made through an agent, the Value of supply shall:
a) be the open market value of such supply.
b) if the open market value is not available, then the value of supply of goods or services of like kind and quality.
c) if the value is not determinable under clause (a) or (b), then the value shall be determined by the application of
rule 30 or rule 31, in that order.
Ü It also provides that if 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, if the recipient is eligible for full ITC, the value declared in the invoice by the supplier shall be deemed
to be the open market value of the goods or services.
Discussion & Conclusion:
Ü In the given case, units of Rustagi & Co. in Madhya Pradesh and Himachal Pradesh are distinct persons under
GST.
Ü The option of valuing the goods @ 90% of the price charged by the recipient to his unrelated customer is not
available as the goods are not further supplied 'as such' but only after processing at Himachal Pradesh unit.
Ü However, since the Himachal Pradesh unit is eligible for full ITC, the value declared by the Madhya Pradesh
unit in the invoice for transfer of such products, i.e. ₹ 20,00,000 shall be deemed to be the open market value of
the products.
Ü Thus, the value of 1000 products supplied by Rustagi & Co. to its Himachal Pradesh unit is the open market
value of such products which is ₹ 20,00,000.

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