presented by ca gagan kedia. gst - @ ica... · rs. 85,000 from reliance digital, in exchange of her...

Presented by –

CA Gagan Kedia

CA GAGAN KEDIA | MRG KEDIA & CO | 1

CA Gagan Kedia | [email protected] | 2

VALUE OF SUPPLY –

Why is it needed ?

To Determine the Amount of Tax Payable


4 Pillars of GST Levy

1) There are 4 BASIC LEGS of any tax levy.

• Incidence of Tax ;• Taxable Person ;• Rate of Tax &• Value / Measure of Tax

2) In case any of the said leg is missing or isambiguous, then the CHARGE or LEVY FAILS.


CONTENTS :

• Legal Provisions

• Mandatory Inclusions & Exclusions

• Value of Goods Imported into India

• Free Supplies & Misc.

• Guiding Rules


LEGAL PROVISIONS


Legal Provisions

1) Section 15(1) to 15(5)

2) Rules 27 to Rule 35

3) Notification No. 9/2017-CT dtd

28.06.2017 – Reg. Effective Date

4) Circular No. 27/01/2018-GST dtd

04.01.2018 – Reg. certain clarification onaccomodation, betting and gambling, horce racing,admission to cinema, homestays, printing, legalservices etc.


Legal Provisions

1) Section 15(1) - Basic Valuation Provision

2) Section 15(2) – Mandatory Inclusions

3) Section 15(3) – Excusions.

4) Section 15(4) – Go to Rules

5) Section 15(5) – For Certain Supply, directly go toRules and don’t look at Transaction Value.

(Such as Pure Agent, Air Tickets, Insurer, Sole Distributor etc)


Sec. 15 (1) - Valuation

“The value of a supply of goods orservices or both shall be:

- the transaction value,

- which is the price actually paid or payable- for the said supply of goods or services or both

- where the supplier and the recipient of the supply

are not related; and

- the price is the sole consideration for the supply.


Who are RELATED PERSONS ? 1/3

Explanation to Sec. 15persons shall be deemed to be “related persons” if–

I. Officers or directors of one another’s businesses;

II. Legally recognised partners in business;

III. Employer and employee;

IV. any person directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of both of them;

V. One of them directly or indirectly controls the other;

VI. Both of them are directly or indirectly controlled by a 3rd person;

VII. Together they directly or indirectly control a third person; or

VIII. They are members of the same family;



EXAMPLE:

1. Mr. X located in Manipal purchases 10,000pieces of pens worth Rs. 4,00,000 fromM/s. ABC located in Kolkata. Mr. X’s wife is anemployee in M/s ABC. The price of each Heropen in the open market is Rs. 52. The supplieradditionally charges Rs. 5,000 for delivering thegoods to the recipient’s place of business.

Which value to go for ?Rs. 405000



EXAMPLE:

M/s. X Pvt Ltd. is owned by RaGa. M/s. Y Printers (also owned byRaga) is engaged in painting machinery equipment.

MR. Modi contracts M/s. X Pvt Ltd., for painting its machineryfor a fee of Rs. 1,50,000.

M/s.X Pvt Ltd. sub-contracts the work to M/s.Y for Rs.1,00,000.

Generally, M/s. Y charges a fixed sum of Rs. 1,000 per hour toits clients; and it spends 120 hours on this project.

Which value to go for on Supply by Y to X?Rs. 120,000


PRICE IS THE SOLE CONSIDERATION 1/3

WHAT IS CONSIDERATION ?

Sec. 2(31)“consideration” includes–

(a) any payment made or to be made, whether in money or otherwise,

in respect of, in response to, or for the inducement of, the supply of goods or

services or both, whether by the recipient or by any otherperson but shall not include any subsidy given by the Central Government or a

State Government;

(b) The monetary value of any act or forbearance...

Provided that a deposit given in respect of the supply of goods or services or both

shall not be considered as payment made for such supply unlessthe supplier applies such deposit as consideration for the said supply;



CONSIDERATION vs. SOLE CONSIDERATION

Example:

1. Mrs. Jaya purchases a Samsung television set costingRs. 85,000 from Reliance Digital, in exchange of herexisting TV set. After an hour of bargaining, the shopmanager agrees to accept Rs. 78,000 instead of hisquote of Rs. 81,000, as he would still be in a profitableposition (the old TV can be sold for Rs. 8,000).

2. Mr. Virat is seller of cricket bats. Due to poor marketconditions, he sells 100 pcs of bats costing Rs.2,50,000 to a trader friend @ Rs. 1,00,000 (This traderfriend had once helped Virat in his bad financial times)



CONTRIBUTION TO CONSIDERATION VS. SPONSORSHIP

Example:

1. A Ltd., is organising a GST Conference event where variouscosts shall be incurred by the organisers such as,transpiration of delegates, fooding & lodging of thedelegates, providing study materials, etc. The ticket priceper participant was coming to Rs. 5000.A Ltd., took money and engaged UBER astheir Transportation Partner Make-my-Trip as theirAccommodation Partner and Dominoes as theFood Partner. Thereafter, the ticket price per participantcame down to Rs. 1500.

2. Viz-a-Viz. Car Wash & OLA


MANDATORY

INCLUSIONS &

EXCLUSIONS


Inclusion & Exclusion from Value:

INCLUDE

Any taxes – other than ?

Liability of Supplier,

paid by receiver

Incidental Exps -

Commission, packing, Any

Inst, Late Fees, Penalty

Subsidy linked to

supply

EXCLUDE

DISCOUNTS

If given before or at the time of

supply & shown in invoice

If given after the supply, PROVIDED as per terms of

agreement and ITC reversal done.


DISCOUNT vs. BAD DEBTS vs. 3rd PARTY FLOW

HOW IS DISCOUNT DIFFERENT FROM BAD DEBTS ?

1. One is unilateral, while the Other is bi-lateral.

2. GST benefit available for one, while not foranother.

3. One is pre-determined, while the other isPayment-linked contingency.

4. Discounts in kind.


VALUE OF GOODS

IMPORTED INTO

INDIA


VALUE OF GOODS IMPORTED INTO INDIA

PROVISO TO SEC 5(1) of IGST ACT

Provided that the integrated tax on goods imported into India shall be

levied and collected in accordance with the provisions of section 3

of the Customs Tariff Act, 1975 on the value as determined under

the said Act at the point when duties of customs are levied on thesaid goods under section 12 of the Customs Act, 1962.


VALUATION OF FREE

SUPPLIES


VALUE OF FREE SUPPLIES

1. Valuation of cases like, Samples,Warranty, Buy 1 Get 2 etc..

2. First Acknowledge that it is a Supply.Refer Sch-I

3. Now, How to Value ? Sec 15(1) fails.

4. Go to Valuation Rules


VALUATION RULES

MRG KEDIA & CO. – GST BASICS| .24

CONSIDERATION NOT WHOLLY IN MONEY

(a) Open Market Value of such Supply

(b) If Market Value NOT AVAILABLE –

Money + Money’s Worth if known

(c) Value of Like kind & Quality

(d) Still cannot find the value –

Money + Money’s Worth as per Rule 30 & 31

SEC. 27 - VALUATION


BETWEEN DISTINCT OR RELATED PERSONS(OTHER THAN AGENTS)

(a) Open Market Value of such Supply

(b) If Market Value NOT AVAILABLE –

Value of Like Kind & Quality

(c) Still cannot find the value –

Rule 30 & 31

Conflict between 1st Proviso & 2nd Proviso

SEC. 28 – VALUATION 1/2


Example:

A Holding company provides a capital equipment (whoseopen market value is not available) to its subsidiarycompany which is not registered under GST.

A similar capital equipment in terms of characteristics,quality, reputation etc. is available in the market at `10,00,000. This value of ` 10,00,000 will be adopted forthe purpose of valuation.



FOR GOODS SUPPLIED THROUGH AGENTS

(a) Open Market Value of such GOODS.

(b) OR optional 90% of –

Value of Like Kind & Quality

(c) Still cannot find the value –

Rule 30 & 31



FOR GOODS SUPPLIED THROUGH AGENTS

Example:•A principal supplies Tea to his agent.

•The agent is supplying Tea of like kind and quality insubsequent supplies at a price of Rs. 5000 per Bag.

•Another independent supplier is supplying Tea of likekind and quality to the said agent at the price of Rs.4550 per Bag.

The value of the supply made by the principalshall be:

Rs. 4550 or Rs.4500



COST METHOD

Applicable if Rule 27, 28 & 29 Fails.

110%

of Cost of production / acquisition / provision of service



RESIDUAL METHOD

Applicable after Rule 27-30 fails

RESONABLE MEANS (Sec 15 & Valn. Rules)

Service Provider can disregard Rule 30 and jump here directly.

SEC. 31– VALUATION 1/1


LOTTERY, GAMBLING, BETTING & HORSE RACING

Has overriding effect.

Lottery by State Govt. – 100/112 of face value of

ticket or price notified by State (whichever is higher)

Lottery by State Auth. – 100/128 of face value of

ticket or price notified by State (whichever is higher)

Others – Value = 100% of the Face Value of Bet

SEC. 31A– VALUATION 1/1


VALUATION RULES:

SEPARATE VALUATION RULES FOR :

Forex / Money Changing Service:

Air Travel Booking

Life Insurance Business

Second Hand Goods

Pure Agent


FOREX / MONEY CHANGING SERVICE:

• Diff in Buy/Sell & RBI Reference rate

• In absence of RBI Rate - 1% of INR Value

• Or

• fixed rate for Full Year➢ 1% Upto 1L – Min 250➢ 1000 + 0.5% upto 10L➢ 5500 + 0.1% above 10L – Max 60K



AIR TICKET BOOKING SERVICE

• TAXABLE VALUE of the Supply of Services• in relation to booking of tickets

• for travel by Air,

• provided by an Air Travel Agent:

• Shall be = 5 % (Domestic) or 10%(International)

• of Base Fare.



BUY / SELL OF SECOND HAND GOODS

Only Minor processing is allowed.

Should not alter the nature of Goods.

NO ITC Should be Claimed.

VALUE = Selling Price – Purchase Price. (Ignore Loss)



1. Overriding

2. Outside the scope of Value of Supply.

3. Take note during Taxable Value & InvoiceValue

SEC. 33 – PURE AGENT


1. Supplier Acts as Pure Agent (PA) when makingpayment to 3rd Party on Authorisation.

2. Separately indicated in invoice.

3. G/S procured as PA are in addition to your main G/S

WHO IS PA ?

1. Enter into contractual agreement to act as PA.

2. Neither intends, nor holds title to G/S so procured.

3. DOES NOT USE the G/S for his own interest

4. NO Mark Up on the reimbursement.

SEC. 33 – PURE AGENT


1. STOCK TRANSFER vs. SALE ON APPROVAL

2. THEFT vs. DONATION vs. CSR.

3. WRITE OFF of fixed Assets vs. DISPOSAL .

4. Liquidated Damages claimed by way of Dr Note.

5. Corporate Guarantee Commission.

SOME CONTENTIOUS ISSUES


1. Scrap allowed to be sold by Job Worker may besuppressing the value of Job work charges. Mayattract enquiry.

2. Market Penetration IS A CONSIDERATION – SC in FIATIndia.

Vs.

Sale of semi-luxury items (such as TV’s, CAR) may besold at a lower value in this SLOW DOWN Market. Thisshould not be viewed in light of FIAT India since scenario idschanged.



1. What about the ACTIVITY of giving essential item(say Sanitizer) which is self manufactured to the poorcitizen through an NGO. Comparable value is 10Crores.

2. It is not a supply for consideration. However, ITC reversal maybe required.

3. In same example above, what if goods worthRs. 10 crore is given away at Rs. 10 lakhs during thecovid-19 situation ?

4. It is a Supply. Value at 10 Lakhs only. ITC reversal may not berequired.


For any queries, feel free to contact -

CA GAGAN KEDIA,Partner – Indirect TaxMRG KEDIA & CO.(Chartered Accountants)Unit No. 408, 4th Floor, Kamalalaya Centre

156A, Lenin Sarani, Dharamtalla, Kol-13

# 98306 82188 ; [email protected]

CA GAGAN KEDIA | MRG KEDIA & CO | 41

mailto:[email protected]

http://www.mrgkedia.com/

presented by ca gagan kedia. gst - @ ica... · rs. 85,000 from reliance digital, in exchange of her...

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