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Direct and Indirect Taxation · Time and Value of Supply

Transaction Value under Section 15 of the CGST Act

Updated 10 October 2026 · Fact-checked

Transaction value is the price actually paid or payable for a supply of goods or services, where the supplier and recipient are not related and price is the sole consideration (section 15(1)). GST is charged on it after adding the section 15(2) items and removing eligible discounts under section 15(3).

Understand Value of Taxable Supply: Transaction Value

GST is charged on the value of supply. Section 15 of the CGST Act tells you what that value is. The main rule is the transaction value: the price actually paid or payable for the supply.

This rule works only when two conditions are met. First, the supplier and the recipient are not related. Second, the price is the sole consideration. If either condition fails, you cannot use the price as it stands. You then value the supply under the prescribed rules (section 15(4)).

Even when both conditions are met, the invoice price is not always the taxable value. Section 15(2) says certain items must be added if they are not already in the price. Section 15(3) says certain discounts are excluded. So the taxable value is the price, plus the section 15(2) items, minus the allowed discounts.

Who is a related person? The Explanation to section 15 lists the cases. Examples: officers or directors of one another's businesses, legally recognised partners, employer and employee, and members of the same family. Also included: a person who owns, controls or holds 25% or more of the voting stock or shares of both, and a sole agent, sole distributor or sole concessionaire and the principal. Persons are related if one controls the other, if both are controlled by a third person, or if together they control a third person.

GST itself is never part of the value. If a price is quoted as inclusive of GST, you first take the tax out, as Rule 35 describes.

Key rules to remember

Transaction value (section 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 with additions
Taxable value = price + section 15(2) items not already in price − allowed discounts (section 15(3))
Section 15(2) items: other-law taxes and charges if charged separately, supplier's liabilities borne by recipient, incidental expenses (commission, packing), interest/late fee/penalty for delayed payment, and subsidies directly linked to price (other than Central or State Government subsidies).
Discount excluded (section 15(3))
Discount excluded if (a) given before or at supply and recorded in the invoice, or (b) given after supply under an agreement made at or before supply, linked to specific invoices, and the recipient's ITC attributable to it is reversed
For a post-supply discount, all three conditions in (b) must be met.
Tax amount in a tax-inclusive price (Rule 35)
Tax = (Value inclusive of tax × tax rate %) ÷ (100 + sum of tax rates %)
For CGST + SGST at 9% each, the denominator is 118. Taxable value = inclusive value − tax.
Related-person supplies (Rule 28(1))
Open market value; if not available, value of like kind and quality; else Rule 30 or 31 in that order
If the recipient is eligible for full ITC, the invoice value is deemed to be the open market value.

How to solve Value of Taxable Supply: Transaction Value questions

Use this order for any question on the value of a taxable supply.

  1. 1Check the parties. Are the supplier and recipient related under the Explanation to section 15? Look for family, directors, 25% shareholding, sole agent or distributor.
  2. 2Check consideration. Is the price the sole consideration? Exchange, barter or other non-money consideration moves you to Rule 27.
  3. 3If both tests pass, start with the invoice price as the transaction value.
  4. 4Add section 15(2) items not already included: other-law duties and taxes charged separately, packing and commission, interest or late fee, linked subsidies other than Government subsidies, and amounts of the supplier borne by the recipient.
  5. 5Deduct discounts only if they meet section 15(3). Check the invoice record for a discount at supply, or the agreement, invoice link and ITC reversal for a later discount.
  6. 6Exclude GST (CGST, SGST/UTGST, IGST) from the value. If the price is tax-inclusive, back out the tax using Rule 35.
  7. 7Compute GST on the final taxable value at the stated rate, and state the answer clearly with a short reason for each add or exclusion.

Quickest way: Add-and-deduct checklist

When to use it: For numerical questions with a list of charges and discounts when time is short.

  1. Write the invoice price on the first line.
  2. Go through each item in the question and mark it as Add, Exclude or Ignore.
  3. Add: packing, commission, other-law duties charged separately, interest on late payment, linked non-Government subsidy.
  4. Exclude: GST charged, and discounts that satisfy section 15(3).
  5. If a discount fails a condition, leave it in the value.
  6. Total the lines and multiply by the GST rate.

Common mistakes in Value of Taxable Supply: Transaction Value

  • Deducting every discount from the price.

    Students assume any reduction in price lowers the value.

    Fix: Allow a discount only if it meets section 15(3). A post-supply discount needs a prior agreement, a link to invoices, and ITC reversal by the recipient.

  • Treating transaction value as always applicable.

    Students forget the two conditions in section 15(1).

    Fix: Always test for related persons and for sole consideration first. If either fails, use the valuation rules.

  • Leaving out packing, commission or interest for late payment.

    These appear as separate lines and look like non-supply items.

    Fix: Section 15(2)(c) and (d) bring them into value. Add them unless the price already includes them.

  • Including GST in the value when computing GST.

    Students add the tax shown on the invoice to the price.

    Fix: Value excludes GST. For a tax-inclusive price, use Rule 35: tax = inclusive value × rate ÷ (100 + rate).

  • Adding Government subsidies to value.

    Students read 'subsidy' as always includable.

    Fix: Only subsidies directly linked to price are included, and subsidies from the Central or State Governments are excluded.

  • Assuming any two connected parties are related.

    Students rely on common sense instead of the list.

    Fix: Use the Explanation to section 15. For example, shareholding must be 25% or more of voting stock in both.

Worked examples

Example 1

Sharma Traders (Jaipur) sells goods to Gupta Stores, an unrelated buyer, for ₹2,00,000. The following are charged separately: packing ₹5,000, commission to its agent ₹3,000 (charged to the buyer), and interest of ₹2,000 for delayed payment. A trade discount of ₹10,000 was recorded in the invoice at the time of supply. Excise-type duty under another law of ₹4,000 is charged separately. Find the taxable value, and the GST at 18%.

Show the solution
  1. Parties are unrelated and price is the sole consideration, so transaction value applies. Price = ₹2,00,000.
  2. The discount of ₹10,000 was given at the time of supply and recorded in the invoice, so it is excluded from value (section 15(3)(a)). Hence the price actually payable = ₹2,00,000 − ₹10,000 = ₹1,90,000. (Treat the ₹2,00,000 as the price before this discount.)
  3. Add packing ₹5,000 and commission ₹3,000 as incidental expenses (section 15(2)(c)).
  4. Add interest for delayed payment ₹2,000 (section 15(2)(d)).
  5. Add duty under another law, charged separately ₹4,000 (section 15(2)(a)).
  6. Taxable value = 1,90,000 + 5,000 + 3,000 + 2,000 + 4,000 = ₹2,04,000.
  7. GST at 18% = 2,04,000 × 18 ÷ 100 = ₹36,720.

Answer: Taxable value ₹2,04,000; GST at 18% is ₹36,720.

Example 2

Mehta Ltd sells a machine to Rao Ltd, an unrelated company, for a price of ₹5,90,000 stated to include GST at 18% (CGST 9% + SGST 9%). It agrees in writing before the supply to give a later discount of ₹20,000, linked to the invoice, and Rao Ltd reverses the related ITC. Find the taxable value, ignoring the discount first, and then after the discount.

Show the solution
  1. Use Rule 35. Sum of rates = 9 + 9 = 18%. Tax = 5,90,000 × 18 ÷ 118 = ₹90,000.
  2. Taxable value before discount = 5,90,000 − 90,000 = ₹5,00,000.
  3. The later discount of ₹20,000 meets section 15(3)(b): agreement at or before supply, linked to the invoice, and ITC reversed by the recipient. So it is excluded.
  4. Taxable value after discount = 5,00,000 − 20,000 = ₹4,80,000.
  5. GST on this = 4,80,000 × 18 ÷ 100 = ₹86,400.

Answer: Taxable value before discount ₹5,00,000; after the eligible discount ₹4,80,000, with GST of ₹86,400.

Exam tips

  • Start every written answer by naming the two conditions of section 15(1) and stating whether each is met. This earns the first marks.
  • In MCQs, look for the trap word: 'related', 'sole consideration', 'recorded in the invoice', or 'Government subsidy'.
  • Show each addition or exclusion on its own line with its clause, such as section 15(2)(c). Step marks follow the working.
  • For tax-inclusive prices, write the Rule 35 formula first, then substitute. Do not use a short cut like 18% of the price.
  • If the parties are related, say that Rule 28 applies and name the order: open market value, like kind and quality, then Rule 30 or 31.

Practice questions from Time and Value of Supply

Value of Taxable Supply: Transaction Value 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 Taxable Supply: Transaction Value: 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 of goods or services or both. It applies where the supplier and recipient are not related and the price is the sole consideration.

What happens if the supplier and recipient are related?

The price cannot automatically be used. Under Rule 28, the value is the open market value, then the value of like kind and quality, then Rule 30 or 31 in that order. If the recipient is eligible for full ITC, the invoice value is deemed to be the open market value.

Is a discount always excluded from the value of supply?

No. A discount at or before supply is excluded only if it is recorded in the invoice. A discount after supply is excluded only if it follows an agreement made at or before supply, is linked to invoices, and the recipient reverses the related ITC.

Is GST included in the value of supply?

No. GST is not part of the value on which it is charged. Section 15(2)(a) adds only taxes and duties under other laws, and only if charged separately. If a price includes GST, take it out using the Rule 35 formula.