Value of Supply: formula sheet

Key formulas

Transaction value (Section 15(1))

Value of supply = price actually paid or payable

Accepted when supplier and recipient are not related and price is the sole consideration.

Value with inclusions (Section 15(2))

Value = Price + non-GST taxes/duties/fees charged separately + supplier's liabilities paid by recipient + incidental expenses + interest/late fee/penalty for delayed payment + linked subsidies (non-Government)

Add an item only if it is not already part of the price. Do not add it twice.

Items never included

Exclude: CGST, SGST/UTGST, IGST, GST Compensation Cess; Central/State Government subsidies; eligible discounts under Section 15(3)

GST is excluded because tax is computed on the value, not as part of it.

Related person test

Persons are related if, as the Explanation to Section 15 provides: they are officers or directors of one another's businesses; they are legally recognised partners in business; they are employer and employee; any person directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of both of them; one directly or indirectly controls the other; both are directly or indirectly controlled by a third person; together they directly or indirectly control a third person; or they are members of the same family. Persons who are the sole agent, sole distributor or sole concessionaire, howsoever described, of the other person are related only where they are treated as related for the purposes of the Act.

If the parties are related, or price is not the sole consideration, the value is found under the valuation rules (Rule 28 for related persons). The invoice value may be accepted if the relationship has not influenced the price.

Discount condition (Section 15(3))

Discount before or at the time of supply: excluded if recorded in the invoice. Post-supply discount: excluded only if agreed before or at the time of supply, linked to specific invoices, and recipient reverses ITC proportionately

Deduct the eligible discount from the price first. Then add the Section 15(2) inclusions to the net price.

Pre-supply discount

Value = Price before discount − discount (only if the discount is shown on the invoice)

Discount must be given at or before the time of supply and recorded in the invoice.

Post-supply discount conditions

Excluded only if (1) agreed at or before supply + (2) linked to specific invoices + (3) recipient reverses proportionate ITC

All three must be met. The supplier issues a credit note under section 34 within its time limit.

Failure of conditions

Discount not allowed → Value = full price (before discount)

Tax remains payable on the gross amount and no reduction is available.

Subsidy inclusion

Value = Transaction value + non-government subsidy directly linked to price

Section 15(2)(e): subsidy from the Central or State Government is not included.

Open market value (OMV)

OMV = full value in money, excluding taxes, payable by an unrelated buyer where price is the sole consideration, at the same time as the supply being valued

First step under Rules 27 and 28. Always exclude GST.

Rule 28 order (related or distinct persons, not through an agent)

OMV → value of supply of like kind and quality → Rule 30 → Rule 31

Move to the next step only if the earlier one is not available. This ladder applies after checking the full ITC proviso.

Rule 28 proviso: full ITC

If the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be OMV

Check the recipient's ITC eligibility first. If it is full, the invoice value is deemed OMV and you accept it.

90% option for goods for further supply (Rule 28(1)(b) and Rule 29(1)(b))

Rule 28(1)(b): Value = 90% × price charged by the recipient for like goods supplied to an unrelated customer. Rule 29(1)(b): Value = 90% × the agent's price to the customer, for goods supplied through an agent

Goods only. Under Rule 28, it is at the supplier's option and applies to goods intended for further supply as such. Rule 29 is a separate rule for goods supplied through an agent, where the base is the agent's price to the customer.

Rule 27: consideration not wholly in money

OMV → money value plus money equivalent of non-money part (if known at time of supply) → like kind and quality → Rule 30 → Rule 31

Used for barter and part-money, part-goods deals.

Rule 30: computed value

Value = 110% × (cost of production or manufacture, or cost of acquisition, or cost of provision of service)

The 10% is a mark-up on cost, not on selling price.

Rule 31: residual method

Value = by any reasonable means consistent with Section 15 principles and the valuation rules

For services, the supplier may opt for Rule 31 directly, skipping Rule 30.

Rule 33: pure agent

Reimbursement excluded from value only if ALL pure agent conditions are satisfied

Failure of any one condition makes the whole amount part of value.

Rule 35: tax inside a tax-inclusive price

Tax = (tax-inclusive value × combined tax rate %) ÷ (100 + combined tax rate %)

Use the total of CGST + SGST/UTGST, or IGST, as applicable.

Currency exchange: spread method (Rule 32)

Value = (Buying or selling rate − RBI reference rate) × units of foreign currency

Applies where one currency is INR. This is the main method under Rule 32(2). The supplier may instead opt for the slab method given below. Where the RBI reference rate is not available, the value is 1% of the gross amount of currency exchanged.

Currency exchange: neither currency is INR

Value = 1% of the lesser of the two amounts obtained by converting each currency into INR at the RBI reference rate

Used for cross-currency exchange, such as dollars to euros.

Currency exchange: slab option

Up to ₹1,00,000: 1% of gross amount, minimum ₹250. Above ₹1,00,000 up to ₹10,00,000: ₹1,000 + 0.5% of amount above ₹1,00,000. Above ₹10,00,000: ₹5,500 + 0.1% of amount above ₹10,00,000, maximum ₹60,000

This is the supplier's option under Rule 32(2), an alternative to the spread method. The supplier uses one or the other. Gross amount means the INR equivalent of the currency exchanged.

Goods supplied through an agent (Rule 29)

Value = open market value; or, at the supplier's option, 90% of the price the agent charges an unrelated customer for goods of like kind and quality

Applies where goods go from principal to agent and the agent undertakes to supply them on behalf of the principal. The two are alternatives. The 90% option does not depend on open market value being unavailable.

Cost-based value (Rule 30)

Value = 110% of cost of production or manufacture, or cost of acquisition, or cost of provision of service

Used when Rules 27 to 29 cannot determine the value.

Residual method (Rule 31)

Value determined using reasonable means consistent with the principles of section 15 and the Rules

Last resort after the other methods fail.

Air travel agent (Rule 32)

Domestic booking: 5% of basic fare. International booking: 10% of basic fare

Basic fare is the part of the fare on which the airline normally pays commission to the agent.

Life insurance (Rule 32)

Gross premium less amount allocated for investment or savings, if made known to the policyholder at the time of supply. Single premium annuity: 10% of single premium. All other cases: 25% of premium in the first year and 12.5% in later years

The investment-deduction method applies only if the allocated amount is intimated at the time of providing the service.

Second-hand goods (Rule 32)

Value = Selling price − Purchase price (the margin). If the margin is negative, the value is nil

Applies to a person dealing in second-hand goods who has not availed ITC on the purchase.

Lottery and similar supplies (Rule 31A)

Value is based on the face value or notified price, grossed down for the applicable rate of tax

Use the exact fraction and rate given in the rule text supplied in the question. Rates have been revised, so do not rely on memory.

Quick revision

• Value of supply is the base on which GST is computed; the GST itself is not part of it.
• Transaction value applies only if parties are unrelated and price is the sole consideration.
• Taxes, duties, cesses, fees and charges levied under any law other than the CGST, SGST, UTGST and IGST Acts and the GST (Compensation to States) Act are added; GST and the compensation cess are excluded.
• Any amount the supplier was liable to pay in relation to the supply but which the recipient has paid, and which is not included in the price, is added. This is different from a pure agent's reimbursement, which is excluded when all conditions are met.
• Incidental expenses, such as commission and packing, charged by the supplier in respect of the supply are added.
• Interest, late fee and penalty for delayed payment are added.
• Subsidies directly linked to the price of the supply are included, except subsidies given by the Central and State Governments.
• A discount given at the time of supply and recorded on the invoice is excluded directly.
• A discount given after supply is excluded only if the agreement was made at or before the time of supply and was known to the recipient at that time, it is linked to specific invoices, and the recipient reverses the ITC attributable to the discount.
• A pure agent's reimbursement is excluded only if every prescribed condition is satisfied.
• If transaction value is rejected, apply the valuation rules in the order laid down.
• Always state the sequence in answers: provision, facts, computation, conclusion.

Common mistakes

• Including GST in the value of supply. Fix: Always find the pre-GST figure first. CGST, SGST, UTGST and IGST are never part of the value.
• Adding a subsidy received from the Central or State Government. Fix: Add a subsidy only if it is directly linked to the price and is not from the Central or State Government.
• Deducting a post-supply discount without checking the ITC reversal condition. Fix: Write the three conditions in the margin and tick each one before deducting.
• Deducting an invoice-level discount that is not shown on the invoice. Fix: Check that the facts say the discount is recorded in the invoice. If not, add it back.
• Treating related persons and distinct persons as the same thing. Fix: Related persons are separate persons linked by the Section 15 relationships. Distinct persons are one person with more than one registration or establishments in different States (Section 25). Name the correct one in your answer.
• Jumping straight to cost plus 10% when OMV is given. Fix: Write the ladder first. Rule 30 applies only when OMV and like kind and quality are both unavailable.
• Charging GST on the gross amount of currency exchanged Fix: Tax only the deemed value under Rule 32, which is the spread or the slab value, not the gross rupee amount.
• Using the selling price of the goods instead of 90% in an agent supply Fix: Treat open market value and 90% of the agent's price to unrelated customers as alternatives. If the supplier opts for 90%, use it, whether or not open market value is available.

Exam tips

• Open every answer with the two conditions for transaction value. Examiners give marks for the provision before the working.
• Make a short two-column list in the margin: 'added' and 'not added'. Write the reason beside each item.
• Watch the words 'charged separately' and 'not included in price'. They tell you whether to add the item.
• In MCQs, check the source of a subsidy first. Government subsidy means no addition.
• Compute GST last, on the final value. Show it as a separate line.
• In case scenarios, underline the word 'invoice' and the payer of any subsidy. Both decide the answer.
• When a post-supply discount appears, write all three conditions, even if the facts satisfy them. Examiners look for the list.
• State your assumption clearly when the base for a percentage rebate is unclear. A stated assumption protects marks.