🔹 Introduction

Under GST, value of supply is crucial since tax is levied as a percentage of value. The general rule is that GST is payable on the transaction value (the price actually paid or payable), but in certain cases, valuation rules under Sec. 15 of CGST Act and Rules 27–35 of CGST Rules apply.

(Reference: Sec. 15, CGST Act; Rule 27–35 of CGST Rules; CBIC clarifications till FY 2024-25)

🔹 General Rule – Transaction Value (Sec. 15)

• Value = Price actually paid/payable for supply, where supplier and recipient are not related and price is sole consideration.

• Includes:

  • Taxes (other than GST) charged separately.

  • Incidental expenses (packing, commission, transport if charged separately).

  • Amount supplier liable to pay but incurred by recipient.

• Excludes:

  • Discounts given before or at time of supply (if recorded in invoice).

  • Post-supply discounts (if agreed beforehand and linked to invoice).

🔹 Special Valuation Rules

✅ Rule 27 – Consideration Not Wholly in Money

If consideration partly non-monetary → Value determined as:

1. Open market value (OMV), or

2. Money + equivalent monetary value of non-monetary consideration, or

3. Value of similar supplies, or

4. Rule 30 (cost+10%) or Rule 31 (reasonable means).

✅ Rule 28 – Related/Distinct Persons

• Supply between related/distinct persons (same PAN, different GSTINs).

• Value = OMV. If not available → Value of like kind/quality → Cost+10% → Reasonable means.

• Proviso: If recipient eligible for full ITC → Value declared in invoice accepted.

✅ Rule 29 – Agent-Principal Transactions

• Value = OMV of goods or 90% of price charged by recipient to unrelated customer.

✅ Rule 30 – Cost Method

• Value = Cost of production/acquisition + 10%.

✅ Rule 31 – Residual Method

• Value determined by reasonable means consistent with GST principles.

✅ Rule 32 – Specific Valuation Cases

• Foreign Currency Exchange: Value = difference in rates or % of transaction value (as per option).

• Air Travel Agents: Value = % of basic fare (5% domestic, 10% international).

• Life Insurance: Value = Gross premium minus investment portion.

• Second-Hand Goods: Value = Difference between selling & purchase price.

✅ Rule 33 – Pure Agent

Expenditure incurred as a pure agent excluded from value if:

1. Payment made on behalf of recipient, and

2. Charged separately without markup.

✅ Rule 34 – Rate of Exchange

• Value of supply in foreign currency → Exchange rate as per RBI.

✅ Rule 35 – Interest, Late Fee, Penalty

• Such charges included in value of supply.

🔹 Practical Examples

Example 1: Supply to Related Person
HO in Delhi transfers goods to branch in Noida (distinct person). Invoice ₹1 lakh. Since full ITC available, invoice value accepted.

Example 2: Consideration in Kind
Supplier provides machinery in exchange for car + ₹2 lakh. Value = OMV of machinery or money value of car + ₹2 lakh.

Example 3: Pure Agent
Consultant pays govt fees of ₹5,000 on behalf of client and charges separately. Not included in value if conditions of Rule 33 satisfied.

Example 4: Air Travel Agent
Agent books domestic ticket with basic fare ₹10,000. Value for GST = 5% of ₹10,000 = ₹500.

🔹 Common Mistakes

• Not including incidental expenses (e.g., transport, packing).

• Wrong valuation in related party transactions.

• Ignoring pure agent conditions.

• Using purchase price instead of cost+10% in absence of OMV.

🔹 Penalties & Risks

• Wrong valuation → Short payment of GST → Recovery + Interest u/s 50 + Penalty u/s 74A (from FY 2024-25).

• Misreporting related party value may attract scrutiny.

🔹 Best Practices

• ✅ Maintain documentation for OMV and like-kind valuation.

• ✅ Use accounting system to capture incidental expenses.

• ✅ Reconcile related party transactions monthly.

• ✅ Train staff on Rule 27–35 applicability.

🔹 FAQs

Q1. Is discount always excluded from value?
➡️ Only if agreed upfront and linked to invoice.

Q2. How to value supply to branch (distinct person)?
➡️ OMV or declared value if recipient eligible for full ITC.

Q3. Is subsidy included in value?
➡️ Yes, if directly linked to price (except govt subsidies).

Q4. Can pure agent expenses be excluded without agreement?
➡️ No, must satisfy Rule 33 conditions.

Q5. How is forex service valued?
➡️ Either difference in rates or % of transaction value as per Rule 32.

🔹 Conclusion

GST valuation rules ensure fair taxation and prevent evasion in special cases. Businesses must apply correct rules (27–35) depending on the nature of supply to avoid disputes and penalties.

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