Page 4 - Chapter 6_Value of Supply

01: Section 15(2): Addition to Transaction Value

Q.1
Determine whether the following taxes and their value shall be included in the value of supply as per
section 15 of CGST Act for levy of GST:-
i) Mr. R recovers rent for premises of ₹ 15,000 and a house tax of ₹ 1000 per month.
ii) Ticket price for entry in film theatre is ₹ 300 and an entertainment tax was levied by local bodies at 40%.
iii) Contract price of supply of goods is ₹ 14,000 inclusive of all taxes and GST is 18%.
Answer: Legal Provision:- As per section 15(2)(a) of CGST Act, 2017, the value of supply shall include taxes,
duties, cesses, fees and charges levied under any law other than GST & GST Cess, if charged separately by the
supplier
Discussion & Conclusion: -Thus, the treatment and valuation in various cases asked shall be as under:-
(i) Value of supply shall be ` 16,000 which is including house tax (i.e. Rent ₹ 15,000 + House tax ₹ 1000).

(ii) Value of Ticket price for entry in film theatre shall be ₹ 420 (i.e Ticket price ₹ 300 + entertainment tax
@40)

(iii) Contract Value is ₹ 14,000 including GST @18%. GST charged shall be worked out as per Rule 35 of
CGST Rules i.e. ₹ 14,000 * 18/118 = ₹ 2,136. Thus, the value of supply for GST will be ₹ 11,864.
Author's Note:- we can show value of supply excluding GST as ` 14,000 * 100/118 = ₹ 11,864

Q.2
How should the supply made by a component manufacturer be valued, when he uses moulds and dies
owned by the original equipment manufacturer sent free of cost to him? Explain [Study Mat]
Answer:-
Ü As per section 15(2)(b) of the CGST Act, Amount that supplier is liable to pay, but incurred by the recipient, is
includible in the value of supply.
Ü CBIC has clarified that while calculating the value of the supply made by the component manufacturer using
moulds and dies owned by Original Equipment Manufacturers (OEM) sent free of cost (FOC) to him, the value
of such moulds and dies shall not be added to the value of supply made by him because the cost of moulds/dies
was not to be incurred by the component manufacturer.
Ü However, if the contract between OEM and component manufacturer was for supply of components made
by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the
OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be added to
the value of the components.

QRPs :- FOC moulds /dies are included in the value of supply only if the component manufacturer was
supposed to incur their cost as per contract. Otherwise, they are excluded.

Q.3
Examine whether the following discounts ought to be excluded to determine the value of supply:
a) Company offering 20% discount for single purchase above ₹ 10,000
b) Company offering additional discount of 1% on purchase of 10,000 pieces in a year
c) After selling a product, the company re-valued the product at a lower value and issued credit note to the
buyer for the differential amount. [Study Mat]

Answer:-

a) Ü The given case is a case of staggered discounts where rate of discount increases with increase in
purchase volume.
Ü Such discounts are shown on the invoice itself.
Ü Therefore, the same are not to be added in the value of supply.

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