Indirect Tax Laws · Value of Supply

Related Persons, Valuation Rules and Pure Agent under GST

Updated 5 October 2026 · Fact-checked

Under GST, supplies between related or distinct persons are valued under Rule 28: open market value first, then like kind and quality, then cost plus 10% (Rule 30), then the residual method (Rule 31). Pure agent reimbursements are excluded from value under Rule 33 only if every condition is met. Follow the order strictly.

Understand Related Persons, Valuation Rules and Pure Agent

Section 15 says the value of a supply is the transaction value, meaning the price actually paid or payable. This holds only when the supplier and recipient are not related and the price is the sole consideration. When either condition fails, the price may not be reliable. The CGST Rules then prescribe how to find the value.

Who is a related person? The Explanation to Section 15 lists the cases. They include officers or directors of each other's businesses, legally recognised partners, employer and employee, and any person who directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of both of them. They also include one person directly or indirectly controlling the other, both being directly or indirectly controlled by a third person, together directly or indirectly controlling a third person, and members of the same family. Sole agents, sole distributors and sole concessionaires are also treated as related. Distinct persons are different: under Section 25, a person with more than one registration, whether in the same State or in different States, is treated as distinct persons for each registration. Establishments of one person in different States or Union Territories are also treated as establishments of distinct persons. They are the same legal entity, but GST treats them as separate for supply. Under Schedule I, supplies between related or distinct persons in the course or furtherance of business are taxable even without consideration.

When the transaction value cannot be used, the rules give a fixed order. Rule 27 covers consideration not wholly in money. Rule 28 covers related and distinct persons. Rule 29 covers supplies through an agent. Rule 30 is the computed value (cost plus 10%). Rule 31 is the residual method, meaning any reasonable means consistent with Section 15. Think of it as a ladder: open market value, then like kind and quality, then cost plus 10%, then residual. You move down only when the step above is not available. Under Rule 28, the proviso sits before the ladder: where the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value.

A pure agent is different. A supplier sometimes pays third parties on behalf of the client, for example government fees, and recovers the exact amount. Such a reimbursement is not the supplier's own supply. Rule 33 lets you exclude it from value only if the strict conditions are satisfied. If even one condition fails, the amount is part of the value and attracts GST at the rate of the main supply.

Rules 34 and 35 are short but examined. Rule 34 deals with conversion of foreign currency. Rule 35 gives the formula to split tax out of a tax-inclusive price.

Key rules to remember

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.

How to solve Related Persons, Valuation Rules and Pure Agent questions

Use this sequence for any question on related persons, valuation rules or pure agent.

1Check the relationship. Are the parties related (Section 15 Explanation) or distinct persons (Section 25)? Is the price the sole consideration? If both are fine, use the transaction value and stop.
2Check the nature of the supply. Is it between related or distinct persons (Rule 28), through an agent (Rule 29), or for non-money consideration (Rule 27)? Pick the right starting rule.
3For Rule 28, check the recipient's ITC. If the recipient is eligible for full ITC, the invoice value is deemed OMV; take it and stop.
4Otherwise, find OMV of the same supply at the same time. If it is not available, use the value of a supply of like kind and quality. For goods meant for further supply as such, note the 90% option.
5If neither is available, apply Rule 30: 110% of the relevant cost. For services, remember the supplier may go directly to Rule 31.
6If cost is also not available or not reasonable, use the residual method of Rule 31 and state the reasonable basis you used.
7Test each reimbursement against the pure agent conditions. Exclude it only if all are met. Otherwise add it to the value.
8Add the other Section 15 inclusions if the facts give them, then compute GST on the final value. Use Rule 35 if the price is tax-inclusive.

Quickest way: Ladder test for related and distinct person valuation

When to use it: Use in case-scenario MCQs and short written answers where facts give only a few numbers.

Underline the relationship words in the case: director, family, 25%, branch, another registration.
Check the recipient's ITC. If full, the invoice value is deemed OMV and is the answer.
If not full, hunt for OMV or a like-kind price in the case. The first one given is the answer, in that order.
If only cost is given, multiply by 1.10. Do not add profit again.
Reimbursements: tick the Rule 33 conditions. The supplier acts as pure agent under a contract; payment is made in the recipient's liability; the recipient authorises it; the recipient knows the third party supplies the goods or services; the supplier holds no title and does not use them for its own interest; the supplier recovers only the actual amount paid; the amount is separately indicated in the invoice; and the goods or services procured are in addition to the services the supplier supplies on his own account. One miss means taxable.
Apply the tax rate last, on the final value, excluding tax.

Common mistakes in Related Persons, Valuation Rules and Pure Agent

Treating related persons and distinct persons as the same thing.
Both are covered by Rule 28 and Schedule I, so the labels blur.
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.
Students remember the 110% figure better than the order of the rules.
Fix: Write the ladder first. Rule 30 applies only when OMV and like kind and quality are both unavailable.
Ignoring the full ITC proviso.
The proviso is short and easy to miss in the question.
Fix: Before any valuation work, check whether the recipient is eligible for full ITC. If yes, the invoice value is deemed OMV.
Excluding every reimbursement as pure agent expense.
Students think any amount shown separately in the invoice is a pure agent amount.
Fix: All conditions must be met. For example, the supplier must recover only the actual amount and must not use the goods or services for its own interest. Travel or courier costs incurred for the supplier's own service remain in value.
Calculating the 10% on selling price or adding it to a price that already includes profit.
The word 'mark-up' is read as a margin on sales.
Fix: Rule 30 value is 110% of cost, nothing more. Compute cost × 1.10.
Including GST in open market value or computing tax on a tax-inclusive price by simple multiplication.
Case prices are sometimes given tax-inclusive and the student forgets to check.
Fix: OMV excludes taxes. If a price includes tax, split it using the Rule 35 formula first.

Worked examples

Example 1

Alpha Ltd (Pune) supplies a lot of machine parts to Beta Pvt Ltd. A person holds 40% of the voting shares of both Alpha Ltd and Beta Pvt Ltd. Alpha invoices ₹4,00,000. Alpha sells an identical lot to unrelated buyers on the same date at ₹5,00,000. Beta makes only exempt supplies. Find the value for GST and the tax at 18%. Then state the value if Beta were eligible for full ITC, and the value if neither OMV nor a like-kind price were available and Alpha's cost of manufacture of the lot is ₹3,20,000.

Show the solution

Relationship: one person holds 40%, which is 25% or more, of the voting shares of both companies. They are related persons, so the invoice price cannot be accepted automatically. Rule 28 applies.
ITC check: Beta makes only exempt supplies, so it is not eligible for full ITC. The proviso does not help.
OMV: an identical lot sold to unrelated buyers at the same time for ₹5,00,000. This is the first step of the ladder, so it applies.
Value = ₹5,00,000. GST at 18% = ₹5,00,000 × 18% = ₹90,000.
Variation 1: if Beta were eligible for full ITC, the invoice value of ₹4,00,000 is deemed OMV. GST at 18% would be ₹72,000.
Variation 2: if neither OMV nor like-kind price were available, Rule 30 applies. Value = 110% × ₹3,20,000 = ₹3,52,000. GST at 18% = ₹63,360.

Answer: Value ₹5,00,000 and GST ₹90,000. If Beta had full ITC, value would be ₹4,00,000 (GST ₹72,000). If only cost were available, value would be ₹3,52,000 (GST ₹63,360).

Example 2

Corp Advisors, a CA firm, bills a client as follows: professional fees ₹60,000; Registrar of Companies filing fee ₹12,000 paid on the client's behalf under written authorisation and recovered at actual, shown separately; and courier and stationery charges ₹3,000 for the firm's own working papers. All amounts exclude GST. Compute the taxable value and GST at 18%.

Show the solution

Professional fees of ₹60,000 are the firm's own supply and are taxable.
ROC fee: the firm pays a third party (the Registrar) for a service the client must pay for. The client has authorised payment, knows the service is provided by the third party, and receives and uses it. The firm holds no title, does not use it for itself, shows it separately and recovers only the actual ₹12,000. All pure agent conditions are met under Rule 33, so ₹12,000 is excluded.
Courier and stationery of ₹3,000 are incurred for the firm's own working papers. They are part of the firm's own service and not a pure agent expense. Include them.
Taxable value = ₹60,000 + ₹3,000 = ₹63,000.
GST at 18% = ₹63,000 × 18% = ₹11,340.

Answer: Taxable value ₹63,000 and GST ₹11,340. The ₹12,000 ROC fee is excluded as pure agent reimbursement.

Exam tips

In MCQs, read the ITC status of the recipient before anything else. The full ITC proviso often makes the answer the invoice value.
For written answers, name the rule, state the ladder, and then apply it with numbers. Use provision, facts, conclusion form.
For pure agent, list the conditions and tick them against the facts in the case. Markers look for a condition-by-condition test.
Write the final GST amount clearly after the value. A correct value with no tax is often a lost mark.
When a case says the supplier may choose Rule 31 directly for services, mention that option explicitly. Check current amendments in your study material.

Practice questions from Value of Supply

Related Persons, Valuation Rules and Pure Agent in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Related Persons, Valuation Rules and Pure Agent: frequently asked questions

What is the difference between related person and distinct person under GST?

Related persons are separate persons linked by relationships listed in the Explanation to Section 15, such as directors, partners, employer-employee or a person directly or indirectly holding 25% or more of the voting stock of both. Distinct persons are one person with several registrations or establishments in different States under Section 25. Both are valued under Rule 28, but the legal basis differs.

Which rules cover GST valuation in the CGST Rules?

Rules 27 to 35 sit in the valuation chapter. Rule 27 covers non-money consideration, Rule 28 related and distinct persons, Rule 29 agents, Rule 30 cost plus 10%, Rule 31 the residual method, Rule 32 certain special supplies, Rule 33 pure agent, Rule 34 exchange rate and Rule 35 tax-inclusive value.

When can reimbursement be excluded as pure agent expense?

Only when every Rule 33 condition is met. The supplier must act as pure agent under a contract, the payment must be made in the recipient's liability, and the recipient must authorise it and know the third party supplies the goods or services. The supplier must hold no title, not use them for its own interest, recover only the actual amount paid and show it separately in the invoice. The goods or services procured must also be in addition to the services the supplier supplies on his own account.

How does the residual method work with an example?

The residual method of Rule 31 applies when Rules 27 to 30 cannot fix the value. You choose a reasonable basis consistent with Section 15, such as a comparable market rate adjusted for differences. For services, the supplier may use Rule 31 directly and skip the cost-plus-10% step.