Skip to content

CA Intermediate · Taxation · Value of Supply

Anand Motors, Pune, supplies a vehicle to its related person, Anand Finance, who is not an employee relationship but a related person under the CGST Act. The open market value of identical goods is ₹10,00,000 and the supply is not for further business use of the recipient. The invoice price is ₹7,00,000 and the recipient is not eligible for full input tax credit. Under the Valuation Rules, what is the value of supply?

The value of supply is ₹10,00,000. Because the parties are related and the price is influenced by the relationship, the transaction value is not accepted. The value is taken as the open market value of the goods, as the Valuation Rules prescribe.

  1. A₹7,00,000
  2. B₹10,00,000Correct
  3. C₹8,50,000
  4. D₹9,00,000

Explanation

Where the supplier and recipient are related persons, the transaction value is accepted only if the price is the sole consideration and the relationship has not influenced the price. Here the price is influenced, so the open market value of ₹10,00,000 applies under Rule 28 for the supply of like kind and quality. Taking the invoice price ignores this rule.

Did you get it right without looking?

One question tells you little. A timed set on Value of Supply shows your real accuracy, how long you take and where you lose marks.

Practise Value of SupplyFree diagnostic mock

More Value of Supply questions