Under soon to be Implemented GST, the event for taxation is not Sales but “Supply”, which includes sales, transfer, barter, exchange, disposal, rental lease and license of goods and services. Some rules that govern the valuation of Supply under GST include:
I. Value of supply of goods or services where the consideration is not wholly in money
In case the supply of goods or services is for consideration not wholly in money, the supply will be valued at:
(i) The open market value of such supply;
(ii) (if open market value is not available) the sum total of consideration in money equivalent to the consideration not in money if such amount is known at the time of supply;
(iii) if the value of supply is not determinable under the above two conditions (i) and (ii) be the value of supply of goods or services or both of like kind and quality;
(a)If an AC is supplied for Rs.25, 000 along with the exchange of an old AC and if the price of the new AC without exchange is Rs.30, 000, the open market value of the new phone is taken at Rs 30,000.
(b)Suppose a Personal Computer is supplied for Rs.30000 along with a barter of printer that is manufactured by the recipient and the value of the printer known at the time of supply is Rs.4000 but the open market value of the PC is not known, the value of the supply of laptop is Rs.34000.
II. Value of supply of goods or services or both between distinct or related persons, other than through an agent
The value of the supply of goods or services or both between distinct persons or where the supplier and recipient are related, other than where the supply is made through an agent, shall,-
(i) be the open market value of such supply
(ii) if open market value is not available, be the value of supply of goods or services of like kind and quality
In case where the recipient is eligible for full input tax credit, the
Value declared in the invoice shall be deemed to be the open market value of goods or services.
This Rule helps in determination of value between distinct or related persons, other than agent. Some cases where this rule will apply will be:
a. Stock / branch transfers
b. Supply of goods/ services between two distinct persons (say between HO in Mumbai and Branch in Lucknow)
c. Supply of Goods / Services between related entities