Indirect Tax Laws and Practice · Valuation under GST

Valuation Rules 27 to 30 under CGST Rules

Updated 11 October 2026 · Fact-checked

Rules 27 to 30 tell you how to value a supply when the price is not a fair arm's-length money price. Rule 27 covers non-money consideration, rule 28 related or distinct persons, rule 29 supplies through an agent, and rule 30 is the cost-based fallback. Apply each rule's clauses in order and stop at the first one that works.

Understand Valuation Rules 27 to 30 under CGST Rules

Section 15 of the CGST Act says the transaction value is the value of a supply when the parties are unrelated and price is the sole consideration. Rules 27 to 30 handle cases where that condition fails. Each rule gives a ladder of methods. You go down the ladder one step at a time and stop at the first step that gives a value.

Rule 27 applies when consideration is not wholly in money, for example barter or an exchange. The order is: (a) open market value, (b) money consideration plus the money equivalent of the non-money part, if that amount is known at the time of supply, (c) value of like kind and quality, (d) rule 30, then rule 31.

Rule 28 applies to supplies between distinct persons (under section 25(4) and (5)) or between related persons, other than through an agent. The order is: (a) open market value, (b) value of like kind and quality, (c) rule 30, then rule 31. Two provisos matter. If the goods are meant for further supply as such by the recipient, the supplier may choose 90% of the price the recipient charges its unrelated customer for goods of like kind and quality. This is an option for the supplier, and it can be used instead of working down the ladder. Also, if the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value. The 90% option is linked to the recipient's selling price to an unrelated customer, not to MRP.

Rule 29 applies to supplies of goods between a principal and his agent. The value is the open market value, or at the supplier's option 90% of the price the agent charges his unrelated customer for goods of like kind and quality, where the goods are meant for further supply by the agent. If neither works, use rule 30, then rule 31.

Rule 30 is the cost method. It applies when the earlier rules fail. Its text was not in the extract supplied, so confirm the exact wording against the rule itself. As commonly applied, the value is the cost of production or manufacture, or the cost of acquisition of the goods, or the cost of provision of the services, plus 10% profit (that is, 110% of that cost). Rule 31 is the residual method. It uses reasonable means consistent with section 15 and the principles of the Chapter. For services, the supplier may opt for rule 31 and skip rule 30.

Key rules to remember

Rule 27 order (consideration not wholly in money): (a) Open market value → (b) Money consideration + money equivalent of non-money consideration (if known at time of supply) → (c) Like kind and quality → (d) Rule 30, then Rule 31; Illustration in the rule: a phone sold for ₹20,000 plus an old phone, with a no-exchange price of ₹24,000, has an open market value of ₹24,000.
Rule 28(1) order (distinct or related persons, no agent): (a) Open market value → (b) Like kind and quality → (c) Rule 30, then Rule 31; Applies to distinct persons under section 25(4) and (5), or to related persons.
Rule 28 first proviso (goods for further supply as such): Value = 90% × price charged by recipient to unrelated customer for like kind and quality goods; Optional for the supplier, and available alongside the ladder when goods are for further supply as such. It does not apply to MRP unless that is the actual price to the unrelated customer.
Rule 28 second proviso (recipient eligible for full ITC): Value declared in invoice = deemed open market value; Taxable value is simply the invoice value, which saves a valuation exercise.
Rule 28(2) corporate guarantee: Value = higher of (1% × guarantee amount per annum) and actual consideration; Applies to a related recipient located in India. If the recipient is eligible for full ITC, the invoice value is deemed to be the value.
Rule 29 (principal and agent, goods): (a) Open market value, or 90% × agent's price to unrelated customer (supplier's option, goods for further supply) → (b) Rule 30, then Rule 31; Illustration: the agent sells at ₹5,000 per quintal, and an independent supplier charges ₹4,550. Value is ₹4,550, or ₹4,500 if the 90% option is used.
Rule 30 (cost method): Value = cost of production/manufacture, or cost of acquisition, or cost of provision of services, plus 10% profit (110% of cost); Rule 30 text was not in the extract supplied. Check the exact wording against the rule before relying on it in an answer.
Rule 31 (residual): Value = reasonable means consistent with section 15 and the Chapter's principles; For services, the supplier may opt for rule 31 and ignore rule 30.
Tax in a tax-inclusive value (rule 35): Tax = (Value inclusive of tax × tax rate %) ÷ (100 + sum of tax rates %); Use this to back out tax from a cum-tax price. Open market value excludes IGST, CGST, SGST/UTGST and cess.

How to solve Valuation Rules 27 to 30 under CGST Rules questions

Use this sequence for any valuation question on rules 27 to 30. The first job is to pick the right rule. The second is to climb its ladder in order.

1Identify the facts: is the consideration partly non-money, are the parties distinct or related, or is there a principal and agent? This picks rule 27, 28 or 29.
2Check for a related-party shortcut. If the recipient is eligible for full ITC under rule 28, the invoice value is deemed to be the open market value, so stop there.
3Go to clause (a) and ask whether an open market value exists. It must be a price between unrelated parties with price as the sole consideration, at the same time, excluding taxes.
4If not, move to the next clause in order. Under rule 27 that is money plus the known money equivalent of the non-money part. Under rules 28 and 29, check like kind and quality. Where goods are for further supply, the supplier also has the 90% option.
5Use the 90% option only if the goods are for further supply as such and the supplier opts for it. It is the supplier's choice and can be used instead of working down the ladder. Compute it on the recipient's price to an unrelated customer.
6If no earlier step gives a value, apply rule 30 (cost plus 10% profit, that is 110% of cost; confirm the wording against the rule). Then use rule 31 only if rule 30 also fails, or if the services supplier opts for rule 31.
7Add GST at the correct rate on the value found. Never include GST inside the open market value.
8State the rule and clause you used, then the final taxable value and the tax.

Quickest way: Rule-and-ladder shortcut

When to use it: Use this for 2-mark MCQs and for case questions where the facts clearly point to one rule.

Classify the facts into one of three keywords: barter (rule 27), related or distinct (rule 28), agent (rule 29).
Scan the question for a known open market value. It is the first-ranked method under rules 27, 28 and 29. But check whether the supplier's 90% option (rules 28 and 29) or the full-ITC proviso (rule 28) applies, because these can change the answer.
If the goods are for further sale by the recipient and the question mentions the recipient's price to an unrelated customer, multiply by 90%.
If the question says the recipient has full ITC under rule 28, take the invoice value.
If only cost data is given, take cost plus 10% profit, that is 110% of cost.
Check the values first for cum-tax or ex-tax wording before choosing.

Common mistakes in Valuation Rules 27 to 30 under CGST Rules

Taking 90% of MRP under rule 28 or 29.
Students mix this up with the retail sale price valuation rule or recall a loose summary.
Fix: The 90% is applied to the price charged by the recipient to his unrelated customer for like kind and quality goods. Check the question for that price.
Treating the 90% option as compulsory.
The proviso reads like a formula, so students apply it automatically.
Fix: The 90% is at the supplier's option and only where goods are intended for further supply. Open market value is the primary method.
Ignoring the full-ITC proviso in rule 28.
Students go straight to valuation without checking recipient eligibility.
Fix: If the recipient is eligible for full ITC, the invoice value is deemed to be the open market value. Check this before computing.
Skipping clause order, for example jumping to rule 30 when like kind and quality value exists.
Cost-plus feels easier to compute.
Fix: Rules 27, 28 and 29 are strict ladders. Use rule 30 only when the earlier clauses cannot determine the value.
Including GST in open market value or like-kind value.
The price in the question is sometimes cum-tax.
Fix: Open market value excludes IGST, CGST, SGST/UTGST and cess. Strip tax first using the rule 35 formula if the price is tax-inclusive.
Adding non-money consideration under rule 27(b) even when it is not known at the time of supply.
Students assume the value of any barter item can be added.
Fix: Clause (b) applies only if the money equivalent is known at the time of supply. Otherwise move down to clause (c) or (d).

Worked examples

Example 1

Sharma Engineering Ltd, Ludhiana, supplies a machine to Gupta Traders for ₹6,00,000 in cash plus raw material supplied by Gupta Traders. The value of the raw material is known at the time of supply as ₹80,000. The open market value of the machine is not available. Find the value of supply and the GST at 18%.

Show the solution

The consideration is not wholly in money, so rule 27 applies.
Clause (a): open market value of the machine is not available, so move on.
Clause (b): value = money consideration plus the money equivalent of the non-money consideration, since that amount is known at the time of supply.
Value = ₹6,00,000 + ₹80,000 = ₹6,80,000.
GST at 18% = ₹6,80,000 × 18% = ₹1,22,400.

Answer: Value of supply is ₹6,80,000 under rule 27(b). GST at 18% is ₹1,22,400.

Example 2

Navbharat Foods Ltd supplies 200 units of packed goods to its related distributor, Kaveri Distributors, who is not eligible for full input tax credit. The goods are meant for further supply as such. Open market value is not available. Kaveri sells like kind and quality goods to unrelated customers at ₹5,000 per unit (excluding tax). Navbharat opts for the 90% method. Find the value of supply and the GST at 18%.

Show the solution

The supply is between related persons and not through an agent, so rule 28 applies.
The recipient is not eligible for full ITC, so the second proviso does not apply.
The goods are for further supply as such, so the first proviso gives the supplier an option to use 90% of the recipient's price to an unrelated customer. Navbharat exercises this option, so it does not need to go further down the ladder.
Value per unit = 90% × ₹5,000 = ₹4,500.
Total value = 200 × ₹4,500 = ₹9,00,000.
GST at 18% = ₹9,00,000 × 18% = ₹1,62,000.

Answer: Value of supply is ₹9,00,000 under rule 28 (first proviso). GST at 18% is ₹1,62,000.

Exam tips

MCQs often test the order of clauses and which option the supplier has. Learn each ladder in sequence.
Look for the keywords: barter or exchange (rule 27), related or distinct (rule 28), agent (rule 29).
Always check the full-ITC proviso in rule 28 before computing. It can make the answer simply the invoice value.
In written answers, name the rule and clause, then show the value and the tax. A clear rule citation earns marks even if arithmetic slips.
Check whether the stated prices include GST. Strip the tax before using them as open market value.

Practice questions from Valuation under GST

Valuation Rules 27 to 30 under CGST Rules in other exams

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

Valuation Rules 27 to 30 under CGST Rules: frequently asked questions

Is the 90% in rule 28 applied to MRP?

No. It applies to the price the recipient charges to his unrelated customer for goods of like kind and quality. It is available only if the goods are for further supply as such, and only at the supplier's option.

When do you use the residual method in rule 31?

Use it when the value cannot be found under rules 27 to 30. It requires reasonable means consistent with section 15 and the Chapter. For services, the supplier may choose rule 31 and skip rule 30.

What is the value of a corporate guarantee to a related person under rule 28(2)?

It is the higher of 1% of the guarantee amount per annum and the actual consideration. The recipient must be a related person located in India. If the recipient is eligible for full ITC, the invoice value is deemed to be the value.

What is the difference between rule 28 and rule 29?

Rule 28 covers supplies between distinct or related persons other than through an agent. Rule 29 covers supplies of goods between a principal and his agent. The ladders look alike, but check which relationship the facts show.