Goods and Services Tax (GST) and Corporate Tax Planning · Value of Supply

Transaction Value and Section 15 CGST Basics

Updated 11 October 2026 · Fact-checked

Under Section 15(1) of the CGST Act, the value of a supply is its transaction value. This is the price actually paid or payable, accepted only if the supplier and recipient are not related and the price is the sole consideration. If either condition fails, value is found under the prescribed rules.

Understand Transaction Value and Section 15 Basics

GST is charged as a percentage of value. So before you compute tax, you must fix the value on which the rate applies. Section 15 gives the rule for that.

The starting point is transaction value. It is the price actually paid or payable for the supply of goods or services or both. The law trusts the invoice price, because two independent parties bargaining at arm's length usually reach a fair price.

This trust has two conditions under Section 15(1). First, the supplier and the recipient must not be related. Second, the price must be the sole consideration. If the buyer also gives something else, such as a loan at no interest or a free service, the price alone does not show the full worth of the deal.

If both conditions are met, the price is the base, and then you add the items in Section 15(2) and leave out the discounts allowed by Section 15(3). If the transaction value cannot be determined under Section 15(1), Section 15(4) says the value is determined in the manner prescribed (the valuation rules). Section 15(5) lets the Government notify certain supplies, on the Council's recommendation, whose value is determined in the prescribed manner even if Section 15(1) would otherwise apply.

Note the words "paid or payable". Tax is on the price agreed, not only on cash received. If the invoice says ₹1,00,000 and the buyer has not yet paid, the value is still ₹1,00,000.

Key rules to remember

Transaction value (Section 15(1)): Value of supply = price actually paid or payable, if (a) supplier and recipient are not related AND (b) price is the sole consideration; Both conditions must be met together. If either fails, Section 15(4) applies and value is determined as prescribed.
Value after adjustments (Section 15(2) and (3)): Value = price paid or payable + Section 15(2) inclusions − eligible Section 15(3) discounts; Inclusions are other-law taxes charged separately, supplier's liabilities borne by the recipient, incidental expenses, interest/late fee/penalty, and subsidies linked to price (other than Central or State Government subsidies).
Related persons (Explanation to Section 15): Related if: officers or directors of one another's businesses; legally recognised partners; employer and employee; 25% or more voting stock held by one person in both; one controls the other; both controlled by a third; together control a third; same family; Sole agent, sole distributor or sole concessionaire of the other are also deemed related. 'Person' includes legal persons.
Fallback rules: Section 15(4): value not determinable under 15(1) → determined as prescribed. Section 15(5): notified supplies → determined as prescribed; Do not invent a method in the exam. Say that the prescribed valuation rules apply.

How to solve Transaction Value and Section 15 Basics questions

Use this order for any question asking for the value of a supply under Section 15.

1Identify the supply, supplier and recipient, and the price in the invoice.
2Test relationship. Check each limb of the Explanation: directors, partners, employer-employee, 25% voting stock, control, family, sole agent or distributor.
3Test sole consideration. Ask if the recipient gives anything beyond the price, such as a free service, advance loan or other benefit.
4State the conclusion. If both tests pass, price is the transaction value. If either fails, Section 15(1) cannot be used and Section 15(4) sends you to the prescribed rules.
5If transaction value applies, add the Section 15(2) items that are charged separately or incurred, such as packing, commission, other-law duties and late fee.
6Deduct only discounts that meet Section 15(3), then compute the final value on which GST is charged.
7Write the conclusion in one line with the section reference.

Quickest way: Two-gate check, then adjust

When to use it: Use it when the question has many facts and little time, and you only need to decide if the price is accepted.

Gate 1: Are the parties related? Scan for director, family, partner, employee, 25% shareholding, control, sole agent.
Gate 2: Is price the sole consideration? Scan for any extra benefit flowing to the supplier.
If both gates are clear, write: price paid or payable is the transaction value under Section 15(1).
If a gate fails, write: value is determined under Section 15(4) as prescribed.
Then do Section 15(2) additions and Section 15(3) discount deductions in one line each.

Common mistakes in Transaction Value and Section 15 Basics

Treating every invoice price as transaction value.
Students remember 'price paid or payable' and forget the two conditions.
Fix: Always test relationship and sole consideration before accepting the price.
Believing that related persons always means the price is rejected.
The word 'related' is overread.
Fix: Section 15(1) accepts the price only when parties are not related, so relation takes you to the prescribed method under Section 15(4). Do not claim the price is automatically wrong; state that Section 15(1) is not available.
Missing the 25% limb of related persons.
Students recall only family, partners and employees.
Fix: Learn all eight limbs and the sole agent, distributor or concessionaire rule. The test is 25% or more of voting stock in both of them held by one person.
Taxing only the amount actually received.
Confusing GST value with cash receipts.
Fix: Value is the price paid or payable. Unpaid price is still included.
Forgetting that 'person' includes legal persons.
Students think related persons means individuals only.
Fix: Companies and firms can be related. Apply the limbs to them too.
Including Central or State Government subsidies in value.
Students read 'subsidies' without the exclusion.
Fix: Section 15(2)(e) includes subsidies directly linked to price but excludes those provided by the Central Government and State Governments.

Worked examples

Example 1

Aarav Traders Pvt. Ltd. sells machine parts to Bhatia Engineering LLP for ₹5,00,000 as per the invoice. Bhatia Engineering has no link with Aarav Traders. Nothing except the price is received by Aarav Traders. Can the price be accepted as the value of supply?

Show the solution

Supplier is Aarav Traders Pvt. Ltd. and recipient is Bhatia Engineering LLP. The price is ₹5,00,000.
Relationship test: no director, partner, employer, 25% shareholding, control, family or sole agent link exists. They are not related.
Sole consideration test: only the price is received, so price is the sole consideration.
Both conditions of Section 15(1) are met.

Answer: Yes. The transaction value is ₹5,00,000, the price actually paid or payable, subject to Section 15(2) additions and Section 15(3) discounts if any.

Example 2

Meera Foods Ltd. supplies goods to Kapoor Retail Pvt. Ltd. at an invoice price of ₹2,00,000. Mr. Kapoor holds 30% of the voting shares of both companies. Meera Foods also charges ₹5,000 for packing separately in the invoice. Determine how value is to be approached.

Show the solution

Relationship test: one person, Mr. Kapoor, owns 30% of the voting shares of both companies. This is 25% or more, so the limb in clause (iv) of the Explanation applies.
The parties are related persons.
Therefore Section 15(1) transaction value is not available, since it needs the parties to be not related.
Under Section 15(4), the value is determined in the manner prescribed under the valuation rules, not by simply taking ₹2,00,000.
Packing is an incidental expense charged by the supplier under Section 15(2)(c). It is part of value if Section 15(1) is used. In this case the prescribed rules govern the method for the whole value.

Answer: The companies are related, so the ₹2,00,000 invoice price is not accepted as transaction value under Section 15(1). Value is determined under Section 15(4) as prescribed.

Exam tips

Write the conclusion in provision, analysis, conclusion order. Quote Section 15(1) first, then apply facts.
Check each fact for a hidden relationship: directors, shareholding of 25% or more, family, sole distributor.
Always state both conditions, even when only one fails, to show you know the rule.
Do not compute a value under the prescribed rules unless the rules are given in the question. Say they apply.
Keep Section 15(2) inclusions and Section 15(3) discounts as a separate step after the transaction value decision.

Practice questions from Value of Supply

Transaction Value and Section 15 Basics in other exams

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

Transaction Value and Section 15 Basics: frequently asked questions

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

It is the price actually paid or payable for a supply of goods or services or both. It is accepted as value when the supplier and recipient are not related and the price is the sole consideration.

When is transaction value not accepted under Section 15?

It is not accepted where the parties are related, or where the price is not the sole consideration. In that case, Section 15(4) says the value is determined in the prescribed manner.

Does paid or payable mean tax applies only on money received?

No. Payable means the price due under the supply, even if the recipient has not paid yet. The value does not depend on actual cash receipt.

Who are related persons for GST valuation?

The Explanation to Section 15 lists officers or directors of one another's businesses, legally recognised partners, employer and employee, 25% or more voting stock held by one person in both, control relationships and family members. Sole agents, distributors and concessionaires are also deemed related.