Indirect Tax Laws · Value of Supply

Special Valuation Cases and Practical Problems under GST (CA Final IDT)

Updated 5 October 2026 · Fact-checked

Special valuation cases are supplies where the transaction value under section 15 cannot be used directly, such as currency exchange, supplies through agents, lotteries, air tickets and insurance. The CGST Rules give a fixed method for each. Identify the supply, apply its rule, compute the value, then apply the GST rate.

Understand Special Valuation Cases and Practical Problems

Section 15 says the value of a supply is the transaction value: the price actually paid or payable, when the parties are unrelated and price is the sole consideration. This works for most sales. It breaks down when there is no clear price, as when a money changer earns only a spread, or when the price is set between a principal and an agent.

For such cases the CGST Rules give deemed methods. Rules 27 to 31 are the general ones: consideration not wholly in money (27), related persons, distinct persons and principal-agent supplies (28), goods sent through an agent for sale (29), cost-based value (30) and the residual method (31). Rule 31A covers lotteries. Rule 32 covers specific services and items: foreign currency exchange, air travel agents, life insurance and second-hand goods.

Vouchers no longer have a special valuation method. The earlier voucher-specific provision in Rule 32 has been omitted, so a voucher that is itself a supply is valued at its transaction value under section 15 and the general rules, as applicable. Do not apply a redeemable-value method to vouchers.

The key idea is that these rules replace the price with a formula, often a margin or a percentage. GST is charged on that deemed value, not on the gross amount handled. A money changer who hands over ₹8,40,000 of rupees does not pay GST on ₹8,40,000. Tax falls on the spread or the slab-based value.

Many of these rules give the supplier an option, for example between the spread method and the slab method for currency. Read the question for hints on which option is expected. If it does not say, pick the one the rule lists first, state your assumption, and show the other if time permits.

In the exam, the question is nearly always a short case followed by the request to compute the value of supply and GST payable. Your marks come from naming the correct rule, showing each step, and applying the right tax rate (CGST plus SGST, or IGST) to the correct value.

Key rules to remember

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.

How to solve Special Valuation Cases and Practical Problems questions

Use the same sequence for any special valuation question. It keeps your answer in provision, facts, conclusion form and protects the marks for method.

1Identify the supply: is it foreign currency, an agent supply, an air ticket, insurance, second-hand goods, a lottery, or a plain supply with a non-money element?
2Name the rule that applies, for example Rule 32 for currency or Rule 29 for agent supplies. Write one line on why it applies.
3Check any condition: option available, ITC availed or not, related persons, whether the goods are intended for further supply.
4Extract the figures and convert them to rupees. Separate items to be added or excluded, such as taxes, discounts and subsidies, under section 15.
5Compute the value step by step. For options, compute each if the question allows, and state which one you adopt.
6Identify the type of supply, intra-State or inter-State, and apply CGST plus SGST or IGST at the given rate on the value.
7State the total tax and the final answer clearly, with any assumption written in one line.

Quickest way: Rule-first shortcut for exam time

When to use it: Use it when you have about 8 to 10 minutes for a computational question worth 5 to 6 marks, or when answering case-scenario MCQs.

Write the rule name and number in the first line before touching the numbers.
Draw a two-line working: Value of supply = ... then GST = ... at the rate.
For currency, calculate the spread first. Compute the slab only if the spread value is not clearly asked for.
Apply percentages directly: 90% for agent, 110% for cost, 5% or 10% for air agents.
Check the sign: negative margin on second-hand goods gives nil value. Do not subtract GST from a value that is already net.

Common mistakes in Special Valuation Cases and Practical Problems

Charging GST on the gross amount of currency exchanged
Students treat the exchange as a sale of goods at the full price.
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
Students forget that Rule 29 allows the 90% option when the agent supplies the goods on behalf of the principal.
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.
Applying 5% or 10% to the whole airfare for an air travel agent
Students do not separate basic fare from taxes and other charges.
Fix: Apply the percentage only to the basic fare, the part on which commission is normally paid.
Treating a negative margin on second-hand goods as a negative value
Students subtract mechanically and forget the rule that a negative margin is ignored.
Fix: If selling price is below purchase price, the value of supply is nil and no tax is payable. Remember also that the margin rule applies only where ITC has not been availed.
Applying a special redeemable-value method to vouchers
Students remember the older voucher provision in Rule 32, which has since been omitted.
Fix: Value a voucher that is itself a supply at its transaction value under section 15 and the general rules, as applicable.
Adding CGST and SGST to a value that already includes them
Students miss the phrase 'inclusive of tax' or fail to apply the rule that tax is not part of the value.
Fix: Read whether the amount is inclusive. If so, divide by (1 + rate) first and then compute tax on the base value.

Worked examples

Example 1

Delhi Forex Ltd, a registered authorised money changer in Delhi, sells 10,000 US dollars to a customer in Delhi at its selling rate of ₹84.00 per dollar. The RBI reference rate at that time is ₹83.20 per dollar. The supplier opts for the spread method. Compute the value of supply and GST payable at 18%. Also compute the value under the slab option for comparison.

Show the solution

Rule: Rule 32 applies to supply of services in relation to purchase or sale of foreign currency. One currency is INR, so the spread method applies.
Spread per dollar = 84.00 − 83.20 = ₹0.80.
Value of supply = 0.80 × 10,000 = ₹8,000.
The supply is intra-State, so CGST plus SGST apply. GST at 18% = 8,000 × 18% = ₹1,440, split into CGST ₹720 and SGST ₹720.
Comparison: gross amount = 10,000 × 84 = ₹8,40,000. Slab for above ₹1,00,000 up to ₹10,00,000 = ₹1,000 + 0.5% × (8,40,000 − 1,00,000) = 1,000 + 0.5% × 7,40,000 = 1,000 + 3,700 = ₹4,700. GST at 18% would be ₹846.
As the rule allows the supplier to choose, the answer follows the option adopted in the question: the spread method.

Answer: Value of supply = ₹8,000 and GST payable = ₹1,440 (CGST ₹720 + SGST ₹720). Under the slab option the value would be ₹4,700 and GST ₹846.

Example 2

Alpha Traders (principal) in Jaipur sends 200 units of a product to its agent in Jaipur for sale. The agent sells the same goods to unrelated customers at ₹500 per unit. The supplier opts for the 90% method. Compute the value of supply and GST payable at 18%. Assume the supply by Alpha Traders to the agent is a taxable supply.

Show the solution

Rule: the goods are supplied by the principal to an agent who will supply them on behalf of the principal. Rule 29 applies.
The supplier has opted for the 90% method. This option is an alternative to open market value and does not depend on open market value being unavailable.
Value per unit = 90% × ₹500 = ₹450.
Total value = 450 × 200 = ₹90,000.
The supply is intra-State, so CGST plus SGST apply. GST = 90,000 × 18% = ₹16,200. CGST ₹8,100 and SGST ₹8,100.
Note: if the agent sold at ₹520 in some cases, the question would need the price for goods of like kind and quality to unrelated customers. Here, use ₹500 as given.

Answer: Value of supply = ₹90,000 and GST payable = ₹16,200 (CGST ₹8,100 + SGST ₹8,100).

Exam tips

Write the rule number first. Examiners award marks for naming the right provision even if arithmetic slips.
Case-scenario MCQs often test one rule: currency, air travel agent percentages, second-hand goods margin or the 90% agent rule. Memorise the fixed percentages.
Show both options when a rule offers a choice and the question does not specify, then state which you adopt. Avoid long comparisons if time is short.
For RTP and MTP style questions, read for 'inclusive of tax', discounts and subsidies before applying a special rule, because section 15 adjustments often sit alongside the special rule.
Check the type of supply last. A wrong split between IGST and CGST plus SGST can cost marks even when the value is right.

Practice questions from Value of Supply

Special Valuation Cases and Practical Problems: frequently asked questions

What is Rule 32 of the CGST Rules in simple terms?

Rule 32 gives fixed valuation methods for certain supplies where price alone does not give a workable value. It covers foreign currency exchange, air travel agents, life insurance and second-hand goods. You apply the rule to compute value, then charge GST at the applicable rate.

How do you find the value of supply for foreign currency exchange?

If one currency is INR, the value is the difference between the buying or selling rate and the RBI reference rate, multiplied by the units exchanged. The supplier may instead opt for the slab method, which gives a value based on the gross amount exchanged. For two non-INR currencies, the value is 1% of the lesser converted amount.

Is the 90% method for agent supplies compulsory?

No. Under Rule 29 the value is either the 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. The 90% option does not require open market value to be unavailable. Use it only when the supplier chooses it.

Do I need to memorise lottery rates for the exam?

Do not rely on memory for lottery fractions, because the rates have been revised. Know that Rule 31A bases the value on face value or notified price and grosses it down for the tax rate. Use the rule text and rates given in the question or the amended statute.