Direct and Indirect Taxation · Computation of GST Liability

Value of Supply for Computing GST under Section 15

Updated 10 October 2026 · Fact-checked

Value of supply is the amount on which GST is charged. Under section 15 CGST Act it is the transaction value: the price actually paid or payable, if the parties are unrelated and price is the sole consideration. Add the listed inclusions, subtract eligible discounts, then apply the GST rate.

Understand Value of Supply for Computing GST

GST is charged as a percentage. So before you apply the rate, you must fix the amount to which the rate applies. That amount is the value of supply, also called taxable value. Section 15 of the CGST Act decides it.

The starting point is the transaction value. This is the price actually paid or payable for the supply. It works only when two conditions hold: the supplier and the recipient are not related, and the price is the sole consideration. If either condition fails, the value is found by the prescribed valuation rules, not by the invoice price.

Next, you adjust the price. Section 15(2) lists amounts that must be added if they are not already in the price. These include other-law taxes and duties charged separately, amounts the supplier must pay but the recipient bore, incidental expenses such as commission and packing, interest, late fee or penalty for delayed payment, and subsidies directly linked to price (other than Central and State Government subsidies).

Section 15(3) lists discounts that are not part of value. A discount given before or at the time of supply is excluded if it is recorded in the invoice. A discount given after supply is excluded only if it was agreed at or before the supply, is linked to specific invoices, and the recipient has reversed the related input tax credit.

The result is the taxable value. GST (CGST plus SGST, or IGST) is then worked out on it. GST itself is not part of the value on which GST is charged. Taxes of other laws charged separately are included, but CGST, SGST, UTGST, IGST and Compensation Cess are not.

Key rules to remember

Transaction value (s.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.
Taxable value: Taxable value = Price + s.15(2) inclusions − s.15(3) eligible discounts; Add inclusions only if not already in the price.
GST payable on supply: GST = Taxable value × GST rate; The rate is CGST + SGST for intra-State supply, or IGST for inter-State supply.
Inclusions (s.15(2)): (a) other-law taxes charged separately; (b) supplier's liability borne by recipient; (c) incidental expenses incl. commission and packing; (d) interest, late fee, penalty for delayed payment; (e) subsidies linked to price, except Central/State Government subsidies; Remember them as five heads, a to e.
Post-supply discount test (s.15(3)(b)): Excluded only if: agreement at or before supply + linked to invoices + recipient reversed ITC; All three conditions must be met.
Related persons (Explanation): Includes directors of each other's businesses, partners, employer-employee, 25% or more voting stock held in both, control, common control, family members, sole agent/distributor/concessionaire; If related, price may not be the transaction value; valuation rules apply.

How to solve Value of Supply for Computing GST questions

Use the same sequence for every valuation question. It keeps the layout clean and earns step marks.

1Check whether supplier and recipient are related and whether price is the sole consideration. If not, say the valuation rules apply.
2Write down the base price actually paid or payable.
3Go through section 15(2) heads a to e. Add each item that is charged separately and is not already in the price.
4Go through section 15(3). Deduct only discounts that meet the conditions. Treat other discounts as part of value.
5Leave out GST charged, and items that are not consideration, such as separately shown amounts the question says are excluded.
6Total up to get the taxable value.
7Apply the rate: CGST and SGST halves for intra-State, IGST for inter-State.
8State the total GST and, if asked, the invoice value.

Quickest way: Add-then-deduct table

When to use it: Use for numerical questions with many items, where you must decide quickly what goes in.

Make two columns: Item and Amount included in value.
Write each item from the question and tick or cross it against s.15(2) or s.15(3).
Add ticked inclusions. Deduct only discounts that pass the tests.
Write one line giving the taxable value, then one line each for the tax.
Add a short note for each excluded item, such as: discount on invoice, excluded under s.15(3)(a).

Common mistakes in Value of Supply for Computing GST

Deducting every discount from the price.
Students assume a discount always reduces value.
Fix: Check timing. Before or at supply, it must be recorded on the invoice. After supply, all three conditions of s.15(3)(b) must be met, including the ITC reversal.
Adding packing or commission charges only when the question says 'extra'.
Students overlook incidental expenses charged by the supplier.
Fix: Incidental expenses charged by the supplier, including commission and packing, are included under s.15(2)(c) if not already in the price.
Including CGST or SGST in the value before charging GST.
Students include every tax mentioned in the invoice.
Fix: Only taxes under other laws, charged separately, are included. CGST, SGST, UTGST, IGST and Compensation Cess are not.
Ignoring interest on late payment.
It looks like a financial charge, not part of the supply.
Fix: Section 15(2)(d) includes interest, late fee or penalty for delayed payment of consideration.
Including all subsidies.
Students remember that subsidies are included but forget the exception.
Fix: Include only subsidies directly linked to price, and not those given by the Central or State Governments.
Using the invoice price for a supply between related persons without comment.
Students skip the related-person check.
Fix: State that transaction value applies only if parties are unrelated and price is sole consideration. Otherwise, the prescribed valuation rules apply.

Worked examples

Example 1

Rahul Traders (Pune) sells goods to Meera Stores (Pune), both unrelated. Price of goods ₹2,00,000. Packing charged separately ₹5,000. Commission paid to agent and charged to the buyer ₹3,000. A trade discount of ₹10,000 is shown on the invoice and was given at the time of supply. GST rate is 18% (CGST 9% + SGST 9%). Compute the taxable value and GST.

Show the solution

The parties are unrelated and price is the sole consideration, so transaction value applies.
Base price = ₹2,00,000.
Add packing ₹5,000 under s.15(2)(c).
Add commission ₹3,000 under s.15(2)(c).
Sum before discount = ₹2,08,000.
Deduct ₹10,000 discount, which was given at the time of supply and recorded in the invoice (s.15(3)(a)). Taxable value = ₹1,98,000.
CGST at 9% = ₹17,820. SGST at 9% = ₹17,820.
Total GST = ₹35,640.

Answer: Taxable value ₹1,98,000; CGST ₹17,820; SGST ₹17,820; total GST ₹35,640.

Example 2

Anil Industries (Nagpur) sold machinery to Kaveri Ltd (Nagpur), unrelated. Price ₹5,00,000. Under the contract, the supplier delivered the goods and Kaveri Ltd paid the transport ₹8,000 that Anil was liable to pay, not included in price. Anil also charged interest of ₹4,000 for late payment. A further discount of ₹15,000 was given after supply under a prior agreement, not linked to specific invoices. GST rate is 18%. Compute taxable value and total GST.

Show the solution

Base price = ₹5,00,000.
Add ₹8,000 transport, an amount the supplier was liable to pay but the recipient incurred, under s.15(2)(b).
Add ₹4,000 interest for delayed payment under s.15(2)(d).
Total = ₹5,12,000.
The post-supply discount of ₹15,000 is not linked to specific invoices, so s.15(3)(b)(i) is not satisfied. It cannot be deducted.
Taxable value = ₹5,12,000.
GST at 18% = ₹5,12,000 × 18 ÷ 100 = ₹92,160.

Answer: Taxable value ₹5,12,000; total GST (CGST 9% + SGST 9%) ₹92,160, being ₹46,080 each.

Exam tips

In MCQs, hunt for the trap: a post-supply discount with a missing condition, or a Government subsidy that is not included.
In written answers, name the sub-section for each addition or deduction. The reason often carries the mark.
Always check the relationship of the parties first. A one-line statement on this earns marks.
Show taxable value as a separate line before tax. Do not merge it with the invoice total.
Read whether the supply is intra-State or inter-State and split the tax correctly.

Practice questions from Computation of GST Liability

Value of Supply for Computing GST 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 for Computing GST: frequently asked questions

What is transaction value under section 15 of the CGST Act?

It is the price actually paid or payable for the supply. It applies when the supplier and recipient are not related and the price is the sole consideration. If either condition fails, the value is found as prescribed in the rules.

Is a discount given after the supply deductible from value?

Yes, but only if three things hold. The discount must be established in an agreement made at or before the supply, specifically linked to relevant invoices, and the recipient must have reversed the input tax credit attributable to it.

Are subsidies included in the value of supply?

Subsidies directly linked to the price are included. Subsidies given by the Central Government and State Governments are excluded from this inclusion.

Who are related persons for valuation?

The Explanation to section 15 lists them. They include directors of each other's businesses, legal partners, employer and employee, persons with 25% or more common voting stock, persons in control relationships, family members, and sole agents, distributors or concessionaires.