Skip to content

Indirect Tax Laws and Practice · Valuation under GST

Value of Supply under Section 15 of the CGST Act

Updated 11 October 2026 · Fact-checked

Under Section 15, the value of supply is the transaction value: the price actually paid or payable, where supplier and recipient are not related and price is the sole consideration. You then add the items in Section 15(2), subtract eligible discounts under Section 15(3), and compute GST on the result.

Understand Value of Supply under Section 15 CGST Act

GST is charged as a percentage of the value of supply. So you must first fix that value correctly. Section 15 gives the basic rule and the adjustments.

The basic rule is the transaction value. It is the price actually paid or payable for the supply. It applies only when two conditions are met: the supplier and the recipient are not related, and the price is the sole consideration. If either condition fails, Section 15(1) does not apply. The value is then found in the manner prescribed (Section 15(4)), that is, the valuation rules.

Next, Section 15(2) says certain amounts are included in the value:

  • Taxes, duties, cesses, fees and charges levied under any other law, if charged separately by the supplier. Tax under the CGST, SGST, UTGST and GST (Compensation to States) Acts is not included.
  • Any amount the supplier is liable to pay for the supply but which the recipient has incurred, and which is not in the price.
  • Incidental expenses such as commission and packing charged by the supplier, and any amount charged for anything done by the supplier in respect of the supply at or before delivery of goods or supply of services.
  • Interest, late fee or penalty for delayed payment of consideration.
  • Subsidies directly linked to the price, but not subsidies given by the Central or State Governments.

Section 15(3) says discounts are excluded in two cases. First, a discount given before or at the time of supply, if it is duly recorded in the invoice. Second, a discount given after the supply, if it is established under an agreement made at or before the time of supply and specifically linked to relevant invoices, and the recipient has reversed the input tax credit attributable to the discount, on the basis of a document issued by the supplier.

The Act also lists who are related persons, such as directors of one another's businesses, partners, employer and employee, and persons where one holds 25% or more of the voting stock of both. Members of the same family, and sole agents or sole distributors, are also related.

Key rules to remember

Transaction value (Section 15(1))
Value = price actually paid or payable
Applies only if supplier and recipient are not related and price is the sole consideration.
Value of supply after adjustments
Value = price + Section 15(2) inclusions − eligible Section 15(3) discounts
GST itself is not part of the value. Other-law taxes charged separately are included.
Tax from a tax-inclusive value (Rule 35)
Tax = (value inclusive of tax × tax rate %) ÷ (100 + sum of tax rates %)
Use the sum of CGST + SGST, or the IGST rate, as applicable.
Related persons threshold
Ownership, control or holding of 25% or more of voting stock or shares of both persons
One of several tests of related persons in the Explanation to Section 15.
Pure agent exclusion (Rule 33)
Pure agent disbursements are excluded from value if all three conditions are met
Payment on authorisation as pure agent; separately shown in invoice; in addition to own supplies.

How to solve Value of Supply under Section 15 CGST Act questions

Use this order for any question on value of supply. It keeps you from missing an inclusion or wrongly deducting a discount.

  1. 1Read the facts and note whether supplier and recipient are related, and whether price is the sole consideration. If not, say Section 15(1) does not apply and go to the valuation rules.
  2. 2Start with the price actually paid or payable as stated in the question.
  3. 3Add Section 15(2) items one by one: other-law taxes charged separately, expenses of the supplier borne by the recipient, incidental expenses such as packing and commission, interest, late fee or penalty, and price-linked non-government subsidies.
  4. 4Test each discount against Section 15(3). A discount recorded in the invoice is excluded. A post-supply discount is excluded only if the agreement and ITC reversal conditions are met.
  5. 5Exclude pure agent disbursements only if all three Rule 33 conditions are met. Never include GST charged under the CGST, SGST, UTGST or Compensation Acts.
  6. 6Arrive at the value of supply, then apply the GST rate if the question asks for tax.
  7. 7State the section reference for each adjustment in your answer.

Quickest way: Add-then-subtract check

When to use it: Use for MCQs and short numerical questions where time is tight.

  1. Write the base price.
  2. Scan the question for the five inclusion words: other duty, recipient-borne cost, packing or commission, interest or late fee, subsidy.
  3. Add each one that qualifies. Skip GST and Government subsidies.
  4. Look for the word discount and ask: on the invoice, or agreed earlier with ITC reversed?
  5. Subtract only qualifying discounts and give the final value.

Common mistakes in Value of Supply under Section 15 CGST Act

  • Including GST charged separately in the value of supply.

    Students read 'taxes' in Section 15(2)(a) and stop there.

    Fix: Section 15(2)(a) covers taxes under other laws. Tax under the CGST, SGST, UTGST and Compensation Acts is excluded.

  • Deducting every discount from the price.

    Discount sounds like a plain reduction.

    Fix: A post-supply discount is excluded only if it is agreed at or before supply, linked to invoices, and the recipient has reversed the related ITC.

  • Applying transaction value to related persons without checking.

    Students ignore the two conditions in Section 15(1).

    Fix: Check relation and sole consideration first. If conditions fail, value is determined as prescribed.

  • Including a Central Government subsidy.

    Students remember that subsidies are included and forget the exception.

    Fix: Only subsidies directly linked to price and not given by the Central or State Governments are included.

  • Treating all reimbursed expenses as pure agent costs.

    Any recovered expense looks like a disbursement.

    Fix: Include the amount unless all three Rule 33 conditions are met. Packing and incidental charges by the supplier are included.

  • Missing interest or late fee for delayed payment.

    Students treat it as a financial charge, not part of the supply.

    Fix: Section 15(2)(d) includes interest, late fee or penalty for delayed payment of any consideration.

Worked examples

Example 1

Rohan Traders, Pune sells machinery to Meera Industries, an unrelated buyer, for ₹5,00,000. It separately charges packing ₹8,000 and freight insurance arranged by it before delivery ₹6,000. It allows a trade discount of ₹10,000 shown on the invoice. Ignore GST. Find the value of supply.

Show the solution
  1. Price: ₹5,00,000. Parties are unrelated and price is the sole consideration, so transaction value applies.
  2. Packing charged by the supplier is an incidental expense: add ₹8,000.
  3. Insurance charged by the supplier for something done before delivery is covered by Section 15(2)(c): add ₹6,000.
  4. Discount recorded in the invoice is excluded under Section 15(3)(a): deduct ₹10,000.
  5. Value = 5,00,000 + 8,000 + 6,000 − 10,000 = ₹5,04,000.

Answer: Value of supply = ₹5,04,000.

Example 2

Anand Pvt Ltd supplies goods to Bharat Ltd for ₹2,00,000. Bharat pays 20 days late and Anand charges interest of ₹4,000. Anand also gets a subsidy of ₹15,000 from a trust directly linked to the price and a Central Government subsidy of ₹10,000. A volume discount of ₹5,000 is given by a credit note after supply under an agreement made before supply and linked to invoices; Bharat has reversed the ITC. Find the value of supply.

Show the solution
  1. Base price: ₹2,00,000.
  2. Interest for delayed payment is included under Section 15(2)(d): add ₹4,000.
  3. Price-linked subsidy from a trust is included under Section 15(2)(e): add ₹15,000.
  4. Central Government subsidy is excluded.
  5. Post-supply discount meets the agreement, invoice-link and ITC reversal conditions, so it is excluded: deduct ₹5,000.
  6. Value = 2,00,000 + 4,000 + 15,000 − 5,000 = ₹2,14,000.

Answer: Value of supply = ₹2,14,000.

Exam tips

  • In MCQs, the trap is usually one item: a Government subsidy, a discount missing a condition, or separately charged GST. Check these first.
  • In written answers, quote the clause such as Section 15(2)(c) or 15(3)(b) beside each adjustment.
  • Always state the two conditions of transaction value before computing. Examiners give marks for it.
  • When parties are related, say that Section 15(1) does not apply and the value is determined as prescribed. Then refer to the valuation rules.
  • Show the working line by line so you earn marks even if one item is wrong.

Practice questions from Valuation under GST

Value of Supply under Section 15 CGST Act in other exams

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

Value of Supply under Section 15 CGST Act: frequently asked questions

What is transaction value under GST?

It is the price actually paid or payable for the supply. It applies only when the supplier and recipient are not related and the price is the sole consideration for the supply.

Is GST included in the value of supply?

No. Tax charged under the CGST, SGST, UTGST and Compensation Acts is not part of the value. Taxes and duties under other laws are included if charged separately by the supplier.

Are subsidies always included in value of supply?

No. Only subsidies directly linked to the price are included, and subsidies from the Central or State Governments are excluded. The subsidy is added to the value of the supplier who receives it.

When is a discount given after supply excluded from value?

It must be established under an agreement made at or before the supply and specifically linked to relevant invoices. The recipient must also have reversed the ITC attributable to the discount based on the supplier's document.

What happens if supplier and recipient are related?

Section 15(1) does not apply, so the value cannot be taken as the price paid. It is determined in the prescribed manner under the valuation rules.