RELATED PARTY UNDER GST

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This discussion clarifies how to handle GST on transactions between related parties, such as sister concerns. It emphasises that sales without consideration are not permitted. For supplies where the consideration isn't solely monetary, specific valuation rules apply, including using open market value, cost of production (110%), or residual methods.

MAHESHA R

MAHESHA R (Querist)
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11 January 2020 Dear Expert

Kindly advise how to treat related party Transaction in GST and we are having day to day sales & Purchase from our Sister Concern Company.

What are the step to be taken care for this transactions.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 January 2020 Give the same treatment for sales/purchase from outsiders.No sale without consideration can be done.

MAHESHA R

MAHESHA R (Querist)
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11 January 2020 Dear Sir
We are doing the same but my doubt is there any special rules for Related Party Transaction while giving Costing for purchase of Goods or Service

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 January 2020 When the supply of goods or services is for a consideration not wholly in money, then value of the supply should be calculated as:

The open market value of such supply;
If open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time of supply;
If the value of supply is not determinable as per the above two conditions, then the value of supply of goods or services should be based on like kind and quality;
If the value of supply is not determinable as per the above three conditions, then the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by the cost method or residual method.
Cost Method for Determining Value of Supply under GST
Where the value of a supply of goods or services or both is not determinable by any of rules prescribed in the procedure for determining value of supply under GST, the value should be taken as 110% of the cost of production or manufacture or cost of acquisition of such goods or cost of provision of such services.

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