Direct and Indirect Taxation · Time and Value of Supply

Inclusions and Exclusions in Value of Supply under GST

Updated 10 October 2026 · Fact-checked

Value of supply is the transaction value, the price paid or payable. Section 15(2) adds items like other-law taxes, incidental expenses, interest or late fee, and price-linked subsidies. Section 15(3) excludes qualifying discounts, and Rule 33 excludes pure agent disbursements. Start with the price, add the inclusions, subtract the allowed exclusions.

Understand Inclusions and Exclusions in Value of Supply

GST is charged on the value of supply. Under section 15(1), this is the transaction value: the price actually paid or payable, where the supplier and recipient are not related and the price is the sole consideration. Real invoices have more than a price on them, so section 15 says what to add and what to leave out.

Think of it as a build-up. Start with the base price. Then add costs that are part of the supply but are billed or incurred separately. These are the inclusions in section 15(2). Then remove amounts the law says do not form part of value. These are the exclusions: discounts under section 15(3) and pure agent disbursements under Rule 33.

The inclusions are: (a) taxes, duties, cesses, fees and charges under any other law, if charged separately by the supplier. GST itself (CGST, SGST, UTGST, IGST and Compensation Cess) is not part of this list; (b) amounts the supplier is liable to pay but the recipient incurred, not already in the price; (c) incidental expenses such as commission and packing charged by the supplier, and charges for anything done in respect of the supply at or before delivery; (d) interest, late fee or penalty for delayed payment; (e) subsidies directly linked to the price, except subsidies from the Central or State Governments.

Discounts are excluded in two ways. A discount given before or at the time of supply must be duly recorded in the invoice. A discount given after the supply must be established under an agreement made at or before the supply, be specifically linked to relevant invoices, and the recipient must have reversed the input tax credit attributable to it, based on the supplier's document. Miss any condition and the discount stays in the value.

A pure agent pays a third party on the recipient's behalf. Such costs are excluded only if all three conditions in Rule 33 are met. The costs must be separately shown in the invoice, the payment must be authorised by the recipient, and the supplies must be in addition to the supplier's own services.

Key rules to remember

Transaction value (section 15(1)): Value = price actually paid or payable; Applies where supplier and recipient are not related and price is the sole consideration.
Value build-up: Value = Base price + Section 15(2) inclusions − Section 15(3) discounts allowed − Rule 33 pure agent costs; Add only items the law lists. Subtract only discounts that meet the conditions.
Inclusions under section 15(2): (a) other-law taxes if charged separately; (b) supplier's liability paid by recipient; (c) incidental expenses incl. commission and packing; (d) interest, late fee, penalty for delay; (e) price-linked subsidies other than Central/State Government subsidies; The subsidy is included in the value of the supplier who receives it.
Discount before or at supply: Excluded if duly recorded in the invoice; Section 15(3)(a).
Discount after supply: Excluded if agreement at or before supply AND linked to invoices AND recipient reversed ITC; Section 15(3)(b). All three must be met.
Pure agent exclusion (Rule 33): Excluded if authorised payment AND separately shown in invoice AND in addition to own supply; Pure agent receives only the actual amount incurred and holds no title to the goods or services.

How to solve Inclusions and Exclusions in Value of Supply questions

Use this order for any value of supply problem. It stops you from missing items or double counting.

1Check that the supplies are between unrelated persons and price is the sole consideration. If not, section 15(1) does not apply directly and valuation rules apply.
2Write the base price from the question.
3Go through each other amount and match it to section 15(2)(a) to (e). Add only the matching items. Do not add GST charged on the invoice.
4Test every discount. Before or at supply: is it recorded in the invoice? After supply: check agreement, invoice link and ITC reversal. Deduct only if conditions are met.
5Test any reimbursed costs against the three Rule 33 conditions. Exclude only if all are met.
6Total the value. Compute GST on it at the given rate, and show each addition and deduction with a reason.
7State what you did not include and why, such as GST itself, a failed discount or a non-pure-agent cost.

Quickest way: Add-Deduct Table

When to use it: For numerical MCQs and 14-mark computation questions with many small items.

Make two columns: Include and Exclude. Put each item in one column.
Mark GST and Government subsidies as not added.
Mark discounts with a tick only when the condition is stated in the question.
Add the Include column, subtract valid exclusions, and apply the GST rate last.

Common mistakes in Inclusions and Exclusions in Value of Supply

Adding GST charged separately to the value of supply.
Section 15(2)(a) mentions taxes charged separately, so students add every tax.
Fix: Section 15(2)(a) covers taxes under laws other than the GST Acts and the Compensation Act. GST is not added.
Deducting a post-supply discount without checking the conditions.
Students treat every discount as excluded.
Fix: For after-supply discounts, confirm agreement at or before supply, link to invoices and the recipient's ITC reversal.
Excluding a discount given at the time of supply that was not on the invoice.
The amount is deducted in the books, so it looks recorded.
Fix: Section 15(3)(a) needs the discount duly recorded in the invoice.
Excluding all reimbursed expenses as pure agent costs.
Students ignore that Rule 33 has three conditions and a definition.
Fix: Check authorisation, separate indication in the invoice, and that the supply is additional to the supplier's own services. Otherwise include them.
Excluding interest on delayed payment because it is not part of the price.
It arises after the supply is made.
Fix: Section 15(2)(d) includes interest, late fee or penalty for delayed payment of consideration.
Including a Central or State Government subsidy.
Students read only 'subsidies directly linked to price'.
Fix: Section 15(2)(e) excludes subsidies provided by the Central and State Governments from inclusion.

Worked examples

Example 1

Sharma Traders (registered, Pune) sells machinery to Kale Industries, an unrelated buyer. Invoice details: price ₹5,00,000; packing charges charged separately ₹10,000; freight incurred by the supplier and charged at ₹15,000 before delivery; trade discount of ₹20,000 shown on the invoice; interest of ₹5,000 for late payment recovered later. Compute the value of supply. Ignore GST on the invoice.

Show the solution

Base price: ₹5,00,000.
Packing charged by the supplier is an incidental expense, section 15(2)(c). Add ₹10,000.
Freight charged for something done before delivery is covered by section 15(2)(c). Add ₹15,000.
Discount of ₹20,000 is given at the time of supply and recorded in the invoice, so section 15(3)(a) is met. Deduct ₹20,000.
Interest for delayed payment is included under section 15(2)(d). Add ₹5,000.
Value = 5,00,000 + 10,000 + 15,000 − 20,000 + 5,000 = ₹5,10,000.

Answer: Value of supply = ₹5,10,000.

Example 2

Mehta & Associates, a corporate services firm, charges professional fees of ₹80,000 to Rao Pvt Ltd for company incorporation. It also recovers ₹6,000 as Registrar of Companies fees, paid on Rao's authorisation, shown separately in the invoice, and ₹4,000 as its own travel cost. It allows a post-supply discount of ₹2,000. There is an agreement before the supply, linked to the invoice, but the recipient has not reversed ITC. Find the value of supply.

Show the solution

Base fee: ₹80,000.
Registrar fees: Mehta acts as a pure agent. The payment was authorised, separately indicated, and is additional to its own services. Under Rule 33, exclude ₹6,000.
Travel cost of ₹4,000 is the supplier's own incidental expense charged to the recipient, so section 15(2)(c) applies. Add ₹4,000.
Post-supply discount: the agreement and invoice link are present, but ITC reversal is missing. Section 15(3)(b)(ii) fails, so the discount is not deducted.
Value = 80,000 + 4,000 = ₹84,000.

Answer: Value of supply = ₹84,000.

Exam tips

In MCQs, look for the trap word: 'separately', 'recorded in the invoice', 'linked to invoices' or 'ITC reversed'.
Always write the section number beside each addition or deduction. Step marks follow reasons.
If the question gives a Government subsidy, do not add it. A subsidy from a non-government source that is linked to price is added.
Write one line stating why GST or a failed discount was left out. Examiners look for it.
Compute GST only after the value is settled, using the rate given.

Practice questions from Time and Value of Supply

Inclusions and Exclusions in Value of Supply in other exams

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

Inclusions and Exclusions in Value of Supply: frequently asked questions

Is GST included in the value of supply?

No. Section 15(2)(a) refers to taxes under laws other than the GST Acts and the Compensation Act. GST itself is not part of the value on which GST is charged.

When is a discount excluded from the value of supply?

A discount at or before supply is excluded if duly recorded in the invoice. A discount after supply is excluded if it is established under an agreement made at or before supply, linked to relevant invoices, and the recipient has reversed the attributable ITC.

Is interest on late payment part of value?

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

What is the difference between an inclusion and an exclusion?

Inclusions are amounts added to the price under section 15(2) because they relate to the supply. Exclusions are amounts the law says to leave out, such as qualifying discounts and pure agent disbursements.