Taxation · Value of Supply

Transaction Value under Section 15(1) of the CGST Act

Updated 4 October 2026 · Fact-checked

Transaction value under Section 15(1) of the CGST Act is the price actually paid or payable for a supply. It is the value of supply only when the supplier and recipient are not related and price is the sole consideration. To solve, test both conditions, take the invoice price, then add Section 15(2) items and subtract allowed discounts.

Understand Transaction Value under Section 15(1)

GST is charged as a percentage of a value. So before you compute tax, you must know the value of supply. Section 15 of the CGST Act, 2017 tells you how to find it. The starting point is Section 15(1).

Section 15(1) says the value of a supply of goods or services or both is the transaction value. This is the price actually paid or payable for the supply. The word "payable" matters. Tax is on the price agreed in the invoice, even if the buyer has not paid yet.

The rule applies only when two conditions are both met. First, the supplier and the recipient are not related. Second, the price is the sole consideration for the supply. Sole consideration means the supplier gets nothing else of value, such as goods in exchange or a side benefit, apart from the price.

Why these conditions? A price between strangers who bargain in the market is a fair guide to value. If the parties are related, or if part of the payment is not money, the price may not reflect the real value. Then the law sends you to other rules (Section 15(4) and the Valuation Rules). Rule 27 applies when the consideration is not wholly in money. Rule 28 applies to supplies between related or distinct persons.

Under Rule 27, the value is the open market value. If that is not available, it is the money consideration plus the money value of the non-monetary consideration, but only if that money value is known at the time of supply. If it is not known, you use the value of a supply of like kind and quality. If that also cannot be found, you take the money consideration plus the non-monetary part valued under Rule 30 or Rule 31 in that order.

Rule 28 applies to supplies of goods or services or both between distinct persons or related persons, other than where the supply is made through an agent. If the parties are related, Section 15(1) does not apply directly. You value the supply under Rule 28. There, the value is the open market value. If that is not available, you use the value of a supply of like kind and quality, and then Rule 30 or Rule 31 in that order.

Two provisos to Rule 28 matter. First, the 90% option applies only to goods, not services. Where goods are intended for further supply as such by the recipient, the supplier may choose to value the supply at 90% of the price the recipient charges his customer for goods of like kind and quality. That customer must not be a related person. This is at the supplier's option. Second, where the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value. So being related does not mean the invoice price is rejected. It only means you reach the value through Rule 28 and not through Section 15(1).

For related persons, the Explanation to Section 15 lists the cases. Examples are: 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, a third person directly or indirectly controls both, or they are members of the same family. Also, if one is the sole agent, sole distributor or sole concessionaire of the other, however described, they are treated as related.

The officer or director test is mutual. Each must be an officer or director of the other's business. One person merely being a director of the other's business is not enough on its own.

The partners clause covers persons who are partners in business with each other. It does not by itself make a partner and the firm related. That pair is tested under the control or 25% clauses.

A subsidiary is a related person only if the control or 25% test is met. A branch is not a related person. Branches of the same entity are distinct persons under Section 25, and Rule 28 applies to them.

Note that the price from 15(1) is only the base. You then add the items in Section 15(2) and reduce the discounts allowed under Section 15(3).

Key rules to remember

Transaction value (Section 15(1)): Value of supply = price actually paid or payable; Applies only if supplier and recipient are not related AND price is the sole consideration.
Two conditions test: Unrelated parties + Price is sole consideration → Section 15(1) applies; If either condition fails, value is found under Section 15(4) and the Valuation Rules, not by taking the price.
Complete value of supply (working view): Value = transaction value + Section 15(2) inclusions − Section 15(3) eligible discounts; GST itself (CGST, SGST, UTGST, IGST) and cess are not part of the value. Tax is computed on the value. Subsidies directly linked to the price are included, except subsidies provided by the Central and State Governments.
Non-monetary consideration (Rule 27): Value = open market value; if not available, money consideration + money value of non-monetary consideration (only if that money value is known at the time of supply); else like kind and quality; else Rule 30 or 31; Rule 27 applies when the consideration is not wholly in money. Price is then not the sole consideration. If the money value of the non-monetary part is not known at the time of supply, go to the value of like kind and quality, and then to Rule 30 or 31.
Related or distinct persons (Rule 28): Value = open market value; else like kind and quality; else Rule 30 or 31. Option of the supplier: for goods (not services) intended for further supply as such, 90% of the recipient's price to his customer, who must not be a related person; Applies to supplies between distinct or related persons, other than through an agent. If the recipient is eligible for full input tax credit, the invoice value is deemed to be the open market value.
Tax on a supply: GST = value of supply × rate of GST; For intra-State supply, split equally between CGST and SGST/UTGST. For inter-State supply, charge IGST.

How to solve Transaction Value under Section 15(1) questions

Use this order for any question on transaction value. It protects your step marks even when the numbers are simple.

1Identify the supplier, the recipient and the supply. Note whether the question gives any link between the parties.
2Test relationship. Check the Explanation to Section 15: persons who are officers or directors of one another's businesses (mutual), partners, employer-employee, any person directly or indirectly owning, controlling or holding 25% or more of the outstanding voting stock or shares of both, control, family, sole agent or sole distributor or sole concessionaire. A subsidiary is related only if the control or 25% test is met. A supply between distinct persons (Section 25) or between related persons, other than through an agent, is valued under Rule 28. If related, Section 15(1) does not apply directly.
3Test consideration. Ask if anything other than money is received, such as goods, services or a side benefit. If yes, price is not the sole consideration and the consideration is not wholly in money, so Rule 27 applies.
4If both conditions are met, write: "Section 15(1) applies; value is the price actually paid or payable." Take the price from the invoice or the agreement.
5Add the Section 15(2) items that are not already in the price, such as other taxes (excluding GST), incidental expenses, interest or late fee for delayed payment, and subsidies directly linked to the price (except subsidies provided by the Central and State Governments).
6Deduct discounts that qualify under Section 15(3). Do not include GST charged separately in the value.
7Compute GST on the final value at the given rate. Show CGST and SGST or IGST as the question requires.
8If a condition fails, state the reason in one line and apply the relevant Valuation Rule (Rule 27 where the consideration is not wholly in money, or Rule 28 for related or distinct persons).

Quickest way: Two-gate check, then price

When to use it: Use this for MCQs and for short written parts where the question asks only for the value of supply.

Gate 1: scan for words like director, partner, family, subsidiary, sole distributor, or a supply between distinct persons (Section 25) such as branches. For related-person words, expect Section 15(1) to fail. A director link counts only if both are officers or directors of one another's businesses. A subsidiary is related only if the control or 25% test is met. For distinct or related persons (other than through an agent), see Rule 28. If goods are meant for further supply as such, the supplier may opt for 90% of the recipient's price to his customer.
Gate 2: scan for words like exchange, barter, part payment in goods, free gift to supplier. If found, price is not the sole consideration, and Rule 27 applies because the consideration is not wholly in money.
If both gates pass, the answer is the price. Ignore GST shown separately in the invoice.
In the written answer, write the section, the two conditions with a tick for each, the value, then the tax. This format earns step marks for law, application and computation.
For MCQs, eliminate options that include GST in the value. Eliminate options that apply Section 15(1) to related parties.

Common mistakes in Transaction Value under Section 15(1)

Applying Section 15(1) when the parties are related
Students see an invoice price and use it without reading the facts about the relationship.
Fix: Always check the relationship first. If the parties are related, use the Valuation Rules (Rule 28) instead of taking the price directly. Remember that the director test is mutual: both must be officers or directors of one another's businesses.
Ignoring the sole consideration condition
Students focus on the money part of the deal and miss goods or services given in return.
Fix: If anything other than price is received, price is not the sole consideration. Rule 27 applies when the consideration is not wholly in money, so use it for the value.
Including GST in the value of supply
Students take the final invoice total as the transaction value.
Fix: Value is before GST. Separate the GST, then compute it on the value. If the price is stated to include GST, back-calculate the value first.
Assuming only paid amounts count
Students read "paid" and forget "payable".
Fix: Tax is on the price paid or payable. Unpaid amounts due under the contract are still part of the value.
Treating related persons as always having a different value
Students think relationship means the price is wrong.
Fix: Relationship only takes the case out of Section 15(1) and into Rule 28. Rule 28 applies to distinct or related persons, other than where the supply is through an agent. Under Rule 28, the value is the open market value. Where the recipient is eligible for full input tax credit, the invoice value is deemed to be the open market value. Where goods are intended for further supply as such by the recipient, the supplier may opt for 90% of the price the recipient charges his customer. Read the facts and conditions before concluding.
Stopping at Section 15(1) and skipping Section 15(2) and 15(3)
Students treat the price as the final value.
Fix: After taking the price, check for inclusions such as incidental expenses and delayed-payment interest, and for eligible discounts.

Worked examples

Example 1

Anand Traders, Pune, sells goods to Bhavesh Stores, Pune, for ₹5,00,000. The two are unrelated. Payment is only in money. The goods are taxable at 18% GST. Find the value of supply and the GST.

Show the solution

Check relationship: Anand Traders and Bhavesh Stores are unrelated. Condition 1 is met.
Check consideration: payment is only in money, so price is the sole consideration. Condition 2 is met.
Section 15(1) applies. Value of supply = price paid or payable = ₹5,00,000.
Supply is intra-State, so tax is CGST 9% + SGST 9%.
CGST = 5,00,000 × 9% = ₹45,000. SGST = ₹45,000. Total GST = ₹90,000.
Invoice total = 5,00,000 + 90,000 = ₹5,90,000.

Answer: Value of supply is ₹5,00,000. GST is ₹90,000 (CGST ₹45,000 + SGST ₹45,000).

Example 2

State whether transaction value under Section 15(1) applies in each case. (a) X Ltd sells machinery to an unrelated buyer for ₹80,000 cash only. (b) Y Ltd sells goods to an unrelated buyer for ₹1,00,000 cash plus old goods worth ₹20,000 given by the buyer as part payment. The money value of the old goods is known at the time of supply. (c) P and Q are legally recognised partners in the same business. P sells goods to Q. Give the value in (a) and (b), assuming open market value in (b) is not available.

Show the solution

Case (a): the parties are unrelated and the price is the sole consideration. Section 15(1) applies. Value = ₹80,000.
Case (b): the parties are unrelated, but the supplier receives money and goods. Price is not the sole consideration. Section 15(1) does not apply.
Case (b) falls under Rule 27, because the consideration is not wholly in money. Open market value is not available, and the money value of the old goods (₹20,000) is known at the time of supply. So value = money consideration + money value of non-monetary consideration.
Value in (b) = 1,00,000 + 20,000 = ₹1,20,000.
Case (c): persons who are legally recognised partners in business with each other are related persons under the Explanation to Section 15. Condition 1 fails, so Section 15(1) does not apply directly.
In case (c), the supply is between related persons and is not made through an agent, so Rule 28 applies. The value is the open market value. If Q is eligible for full input tax credit, the invoice value is deemed to be the open market value. No figures are given, so no value is computed.

Answer: (a) Section 15(1) applies; value ₹80,000. (b) Section 15(1) does not apply; value under Rule 27 is ₹1,20,000. (c) Section 15(1) does not apply as the parties are related; value is determined under Rule 28 (invoice value is deemed open market value if Q is eligible for full input tax credit).

Exam tips

Write both conditions of Section 15(1) in every answer, and tick each against the facts. Examiners award marks for the test, not only the number.
Read the first lines of the question for relationship hints such as director, partner, family, holding company or sole distributor. A director link signals a related person only when both are officers or directors of one another's businesses.
MCQs often hide the trap in the options. One option includes GST in the value, another ignores part payment in goods. Pick the option that matches both conditions.
Never forget to compute the GST after finding the value, unless the question asks only for value. Show CGST and SGST or IGST separately.
Link the topic with Section 15(2) and 15(3). Many questions combine price, extra charges and discounts in one problem.

Practice questions from Value of Supply

Transaction Value under Section 15(1) in other exams

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

Transaction Value under Section 15(1): frequently asked questions

What is transaction value under Section 15(1) of the CGST Act?

It is the price actually paid or payable for the supply of goods or services or both. It is the value of supply only if the supplier and recipient are not related and price is the sole consideration.

What happens if the supplier and recipient are related?

Section 15(1) does not apply directly. For supplies between related or distinct persons, other than through an agent, the value is determined under Rule 28. The invoice value is deemed to be the open market value where the recipient is eligible for full input tax credit. For goods (not services) meant for further supply as such, the supplier may opt for 90% of the price the recipient charges his customer, who must not be a related person.

Is GST included in the transaction value?

No. GST (CGST, SGST, UTGST and IGST) and cess charged on the supply are not part of the value. GST is computed on the value. If the price is given as inclusive of GST, remove the tax first to find the value.

What does 'price is the sole consideration' mean?

It means the supplier receives nothing of value other than the price. If the supplier also gets goods, services or some other benefit, price is not the sole consideration. Rule 27 applies when the consideration is not wholly in money.