Value of a supply of goods or services or both shall be the transaction value, that is the price actually paid or payable for supply of goods or services or both where
(a) Supplier and recipient should not be related.
(b) Price is the sole consideration.
Value doesn't include GST, but includes other taxes
- Any taxes, duties, fees and levies charged under any statute other than the SGST Act, CGST Act, IGST Act or the GST (Compensation to States for Loss of Revenue) Act are includible in value, if charged separately - Sec 15(2)(a) of the CGST Act.
- SGST and CGST will be payable on the net value only.
- 'Value' for GST will not include IGST, CGST, SGST, UTGST and GST Compensation Cess. However, other taxes (like entertainment tax or some other cess) will be included if charged separately in the invoice.
- Value for payment of IGST, CGST, and SGST in Kerala State would not include Kerala food cess.
- 'Value' does not include TCS under the IT Act.
Amount paid by the recipient on behalf of the supplier
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 is included in value -Sec 15(2)(b) of GST Act.
This can't cover free inputs or services supplied by the recipient, as only 'amount' paid by recipient on behalf of supplier is includible.
Incidental expenses incurred before supply
Incidental expenses including commission and packaging, charged by the supplier to the recipient of a supply, including any amount charged for anything done by supplier in respect of supply of goods or services or both at the time of, or before delivery of goods or, as the case maybe, supply of services are includible in value- Sec15(2)(c) of CGST Act.
Expenses like weighing, loading in the factory, inspection and testing before supply will be included in 'value'. Design charges incurred before supply will also be included.
Interest, late fee or penalty for delayed payment
Interest or late fee or penalty for delayed payment of any consideration for any supply is includible in value- Sec 15(2)(c) of CGST Act.
The term delayed means 'delay beyond agreed terms'.
GST should not be levied on normal interest payable by the recipient as per the agreed terms of the contract.
GST on penal interest on EMI (Equated Monthly Instalment)
(a) If the seller himself grants EMI instalments - In this case, if the seller charges penal interest, it will be part of the value of goods as per Sec- 15(2)(c) of the CGST Act.
(b) If a loan is provided by a finance company directly to buyer - In this case, the interest (including penal interest) is exempt under Sr No. 27 of Notification No.12/2017-CT (Rate) dated 28-6-2017.
(c) In Infrastructure Development Finance Co. Ltd. v. ACIT [2019] taxmann.com 205 (Mad HC), it has been held that liquidity damages recovered from borrowers in case of default in case of payment of interest and other dues (which has 2.10%) was really 'interest' so not liable to GST.
GST on outward freight, packing and other charges in the tax invoice
In case of free on road contracts, the supplier arranges transport. In that case, he pays GST under reverse charge on outward freight. He then charges outward freight in the tax invoice.
In such case, the outward freight charges is part of value of goods and GST is payable on value including outward freight.
It is not correct to charge freight separately and charge GST @ 5% as the service of supplier of goods is not Goods Transaction Agency Service at all.
GST rate will be same rate as for goods. The supplier will pay GST on reverse charge on the freight charges by GTA and the credit of same will be available.
Subsidies directly linked to the supply other than Government subsidies
Subsidies directly linked to the price, excluding subsidies provided by the Central and State Government, are included in 'Value' for the charge of GST.
Discount or incentive given after supply
The value of the supply shall not include any discount that is given:
(a) Before or at the time of the supply provided such discount has been duly recorded in the invoice issued in respect of such supply and
(b) After supply has been effected, provided that
(I) Such discount is established in terms of an agreement entered at or before the time of such supply and specially linked to relevant invoices and
(ii) Input tax credit as is attributable to the discount has been reversed by the recipient of the supply- Sec 15(3) of CGST Act.
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