Indirect Tax Laws and Practice · Valuation under GST

GST Valuation of Related and Distinct Person Supplies

Updated 11 October 2026 · Fact-checked

Under GST, value is the transaction value when parties are unrelated and price is the sole consideration. If they are related, distinct persons, or payment is not wholly in money, use Rule 27 or Rule 28. Start with open market value and move down the clauses, ending with Rule 30 and then Rule 31.

Understand Time, Place and Value Interlinking

Section 15 of the CGST Act starts with a simple rule. The value of a supply is the transaction value, the price actually paid or payable. This works only when the supplier and recipient are not related and the price is the sole consideration.

Two situations break this rule. In the first, the price is not the only consideration, or is not wholly in money. Examples are barter and exchange offers. In the second, the supplier and recipient are related persons, or are distinct persons (for example, two registrations of the same company) whose supply is taxable under section 25(4) and (5). Here the price may not reflect a fair market deal. Section 15(4) says that when value cannot be found under section 15(1), it is determined as prescribed. The rules prescribe it.

Rule 27 covers consideration not wholly in money. Rule 28 covers related and distinct persons, other than through an agent. Both follow a fallback ladder. You try the first method. Only if it fails do you move to the next.

Who is a related person? Section 15 Explanation lists the cases. They include officers or directors of one another's businesses, legally recognised partners, employer and employee, a person holding 25% or more of the voting stock of both, one controlling the other, both controlled by a third person, together controlling a third person, and members of the same family. Sole agents, sole distributors and sole concessionaires are also deemed related. Persons include legal persons.

Open market value (OMV) means the full value in money, excluding IGST, CGST, SGST/UTGST and cess, in a transaction between unrelated persons where price is the sole consideration, at the same time as the supply being valued.

Key rules to remember

Section 15(1): transaction value: Value = price actually paid or payable; Applies only if supplier and recipient are not related and price is the sole consideration.
Rule 27: consideration not wholly in money (ladder): (a) OMV; (b) money consideration + money equivalent of non-money consideration, if known at time of supply; (c) like kind and quality; (d) money + non-money equivalent by Rule 30 or Rule 31, in that order; Move down only when the earlier clause cannot be applied.
Rule 28(1): related or distinct persons (ladder): (a) OMV; (b) value of like kind and quality; (c) Rule 30 or Rule 31, in that order; Applies to supplies between distinct persons under section 25(4) and (5), or between related persons, not through an agent.
Rule 28 first proviso: goods for further supply: Value = 90% × price charged by the recipient to his unrelated customer for goods of like kind and quality; At the option of the supplier, where goods are intended for further supply as such by the recipient.
Rule 28 second proviso: recipient eligible for full ITC: Value declared in the invoice = deemed OMV; Applies to goods or services where the recipient is eligible for full input tax credit.
Rule 28(2): corporate guarantee: Value = higher of 1% of guarantee amount per annum, or actual consideration; Applies to a related recipient located in India, for a guarantee to a bank or financial institution. If recipient is eligible for full ITC, the invoice value is deemed the value.
Rule 35: tax from a tax-inclusive value: Tax = (Value inclusive of tax × tax rate %) ÷ (100 + sum of tax rates %); Use the combined rate of CGST + SGST, or the IGST rate.
Section 15(3): discounts: Discount excluded from value if recorded in the invoice, or post-supply discount agreed in advance, linked to invoices, with ITC reversed by the recipient; Check these conditions before deducting any discount.

How to solve Time, Place and Value Interlinking questions

Use the same ladder every time. Decide which rule applies, then walk down the clauses in order and stop at the first one that works.

1Check whether the parties are related persons (section 15 Explanation) or distinct persons under section 25(4) and (5), and whether the supply is through an agent.
2Check whether the consideration is wholly in money. If not, Rule 27 applies. If the parties are related or distinct, Rule 28 applies. If a related-party supply is also for non-money consideration, the official text does not prescribe a combined rule, so state your assumption.
3Look for the open market value. Exclude GST and cess from it. If given as tax-inclusive, strip the tax using the Rule 35 formula.
4If OMV is not given, look for a supply of like kind and quality. Under Rule 27, clause (b) comes before like kind: use money plus the known money equivalent of the non-money part.
5Check the provisos under Rule 28: the 90% option for goods meant for further supply, and the deemed OMV where the recipient has full ITC.
6Only if nothing above works, the value is determined by Rule 30 and then Rule 31, in that order.
7Add section 15(2) items if they are charged separately or not already in price, and deduct only valid section 15(3) discounts. Then compute GST on the final value.
8State the value, the rule and clause used, and the tax.

Quickest way: Ladder scan for valuation MCQs

When to use it: Use this in Section A MCQs and in the first few lines of a written answer.

Underline the relationship: related, distinct, or unrelated. Underline whether any part of payment is not money.
If OMV is stated, that is the answer (excluding GST). Stop.
Under Rule 27, if no OMV but the money equivalent of the non-money item is known at supply, add it to the money paid.
Under Rule 28, if goods go on for resale and the supplier opts, take 90% of the recipient's price to an unrelated customer.
If the recipient has full ITC under Rule 28, accept the invoice value.

Common mistakes in Time, Place and Value Interlinking

Using the invoice price for every related party sale.
Students assume section 15(1) always applies.
Fix: Section 15(1) needs unrelated parties and price as sole consideration. For related or distinct persons, go to Rule 28, where OMV comes first.
Applying like kind and quality before the money-plus-equivalent clause in Rule 27.
Students assume the order is the same as Rule 28.
Fix: Rule 27 order: OMV, then money plus known equivalent, then like kind and quality, then Rule 30 or 31.
Treating the 90% rule as compulsory.
The proviso reads like a fixed formula.
Fix: It is at the option of the supplier and applies only to goods intended for further supply as such by the recipient.
Including GST in open market value.
Prices in questions are sometimes tax-inclusive.
Fix: OMV excludes IGST, CGST, SGST/UTGST and cess. Remove tax using Rule 35 if the figure is inclusive.
Treating distinct persons and related persons as the same thing.
Both are covered by one rule, Rule 28.
Fix: Distinct persons are, for example, registrations of the same entity in different States, taxed under section 25(4) and (5). Related persons are defined in the section 15 Explanation. Rule 28 covers both.
Ignoring the full-ITC proviso.
Students rush to compute OMV.
Fix: If the recipient is eligible for full ITC, the invoice value is deemed the OMV. Check this before any recomputation.

Worked examples

Example 1

Ravi Electronics Ltd, Pune, sells a laptop to Meera Traders for ₹40,000 in cash and takes in exchange a printer made by Meera Traders. The printer's value, known at the time of supply, is ₹4,000. The open market value of the laptop is not known. Find the value of supply of the laptop.

Show the solution

The consideration is not wholly in money, so Rule 27 applies.
Clause (a): OMV of the laptop is not available, so move on.
Clause (b): value = money consideration + money equivalent of the non-money consideration, if known at the time of supply.
The printer's value of ₹4,000 is known at the time of supply.
Value = ₹40,000 + ₹4,000 = ₹44,000.

Answer: Value of supply of the laptop is ₹44,000 under Rule 27(b).

Example 2

Sundaram Motors Ltd supplies goods to Kaveri Auto Pvt Ltd, a related person under common control, who will resell them as such. Open market value and the value of like-kind goods supplied by the supplier are not available. Kaveri sells identical goods to an unrelated customer at ₹2,00,000 (excluding GST). Kaveri is not eligible for full ITC. The supplier opts for the 90% proviso. Find the value of supply and GST at 18%.

Show the solution

The parties are related persons under common control, so Rule 28(1) applies.
Clauses (a) and (b) fail, as OMV and like-kind value are unavailable.
The goods are intended for further supply as such, and the supplier opts for the proviso.
Value = 90% × ₹2,00,000 = ₹1,80,000.
GST at 18% = ₹1,80,000 × 18% = ₹32,400.

Answer: Value of supply is ₹1,80,000 and GST at 18% is ₹32,400.

Exam tips

Write the rule number and clause beside each step. Examiners award marks for the correct rule.
Read the first line for the relationship. The same numbers give different answers under Rule 27 and Rule 28.
In MCQs, the illustration in Rule 27 is a favourite: ₹20,000 plus an old phone exchange, with the new phone's OMV of ₹24,000, gives value ₹24,000.
State assumptions clearly if the question does not say whether the recipient has full ITC.
If a tax-inclusive price is given, strip tax with the Rule 35 formula before applying any rule.

Practice questions from Valuation under GST

Time, Place and Value Interlinking: frequently asked questions

What is the difference between a related person and a distinct person in GST valuation?

Related persons are those listed in the Explanation to section 15, such as directors, partners, employer and employee, or persons under common control. Distinct persons are, for example, registrations of the same person in different States, treated as separate for supplies under section 25(4) and (5). Rule 28 values supplies between both, other than through an agent.

How is GST value found when consideration is not wholly in money?

Use Rule 27. Take OMV first. If it is unavailable, add the money paid and the money equivalent of the non-money consideration, if known at the time of supply. Then try like kind and quality, then Rule 30 or Rule 31.

Is the 90% valuation option for related party supplies compulsory?

No. It is at the option of the supplier. It applies where goods are intended for further supply as such by the recipient, and the value is 90% of the recipient's price to an unrelated customer for goods of like kind and quality.

How is a corporate guarantee valued between related persons?

Under Rule 28(2), the value is the higher of 1% of the guarantee amount per annum or the actual consideration. This applies where the recipient is a related person located in India. If the recipient has full ITC, the invoice value is deemed the value.