Sale of goods at less value than purchase value in gst
This query is : Resolved
02 August 2017
Hi,
Can we sell goods at less value than purchase value due to fulfillment of previous order under GST.
What will be the treatment under GST. Will it be considered as tax evasion under GST or not ?
Please share clause, if any under GST.
Can we sell goods at less value than purchase value due to fulfillment of previous order under GST.
What will be the treatment under GST. Will it be considered as tax evasion under GST or not ?
Please share clause, if any under GST.
02 August 2017
ITC refunded.......
03 August 2017
we are considering purchase value at basic price and sale value is less than the purchase value (basic price).
In that case, is it considered as tax evasion or not.
We have to fulfill order at loss and want to retain customer for future
In that case, is it considered as tax evasion or not.
We have to fulfill order at loss and want to retain customer for future
03 August 2017
If the buyer is un-related , you can sell even below cost , no worry.
03 August 2017
Thanks for the reply.
But can anybody share any clause in GST for evasion of tax.
What will GST dept. consider it.
loss on sale of goods or reduce value to evade tax.
But can anybody share any clause in GST for evasion of tax.
What will GST dept. consider it.
loss on sale of goods or reduce value to evade tax.
22 July 2025
Can you sell goods below purchase price under GST?
Yes, you can sell goods at a price lower than your purchase cost. GST law does not prohibit selling below cost, and it is not automatically considered tax evasion if the sale is genuine.
Important points:
Genuine transaction:
The sale must be genuine, and the invoice should reflect the true transaction value.
Valuation under GST:
GST is payable on the transaction value (the price actually paid or payable for the supply).
Related party transactions:
If the sale is to a related party or there is suspicion of undervaluation to evade tax, the tax authorities can invoke provisions for valuation.
Relevant GST provisions related to valuation and evasion:
Section 15 of CGST Act, 2017: Deals with valuation of supply and requires the transaction value to be the price actually paid or payable, excluding GST.
Section 16(2) CGST Act: ITC is available only on goods/services used for business, and if transactions are not genuine or undervalued, ITC can be denied.
Section 122 and 132 (Penalties) of CGST Act: Tax evasion or fraudulent activities can lead to penalties and prosecution.
What GST department looks for:
If sale is below cost but genuine and properly documented, no issue arises.
If sale value is artificially lowered to evade tax or manipulate ITC, authorities can initiate inquiries.
Documentation such as contracts, orders, delivery challans, correspondence supporting the reason for below-cost sale will help.
Summary Table
Situation GST Treatment Risk of Tax Evasion
Sale below purchase price (unrelated party, genuine) Allowed, GST on actual sale price No
Sale below cost to related party or suspicious undervaluation Authorities may investigate Possible if proven as evasion
Practical advice:
Maintain proper documentation justifying below-cost sales (e.g., customer retention, fulfilling previous orders).
Ensure invoices show true transaction values.
Yes, you can sell goods at a price lower than your purchase cost. GST law does not prohibit selling below cost, and it is not automatically considered tax evasion if the sale is genuine.
Important points:
Genuine transaction:
The sale must be genuine, and the invoice should reflect the true transaction value.
Valuation under GST:
GST is payable on the transaction value (the price actually paid or payable for the supply).
Related party transactions:
If the sale is to a related party or there is suspicion of undervaluation to evade tax, the tax authorities can invoke provisions for valuation.
Relevant GST provisions related to valuation and evasion:
Section 15 of CGST Act, 2017: Deals with valuation of supply and requires the transaction value to be the price actually paid or payable, excluding GST.
Section 16(2) CGST Act: ITC is available only on goods/services used for business, and if transactions are not genuine or undervalued, ITC can be denied.
Section 122 and 132 (Penalties) of CGST Act: Tax evasion or fraudulent activities can lead to penalties and prosecution.
What GST department looks for:
If sale is below cost but genuine and properly documented, no issue arises.
If sale value is artificially lowered to evade tax or manipulate ITC, authorities can initiate inquiries.
Documentation such as contracts, orders, delivery challans, correspondence supporting the reason for below-cost sale will help.
Summary Table
Situation GST Treatment Risk of Tax Evasion
Sale below purchase price (unrelated party, genuine) Allowed, GST on actual sale price No
Sale below cost to related party or suspicious undervaluation Authorities may investigate Possible if proven as evasion
Practical advice:
Maintain proper documentation justifying below-cost sales (e.g., customer retention, fulfilling previous orders).
Ensure invoices show true transaction values.
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