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CA Final · Indirect Tax Laws · Value of Supply

Anand Steels Ltd, Pune, supplies steel bars to Anand Traders Pvt Ltd, a related person, for further supply as such. Open market value and value of like kind and quality are not available for this supply. Anand Traders sells identical bars to unrelated customers at Rs 60,000 per tonne. Anand Steels supplies 10 tonnes, opts for the 90% proviso, and the recipient is not eligible for full input tax credit. What is the value of supply by Anand Steels?

The value is Rs 5,40,000. The supplier opted for the proviso, so the value is 90% of the Rs 60,000 per tonne price charged by the related recipient to unrelated customers, which is Rs 54,000 per tonne, multiplied by 10 tonnes.

  1. ARs 5,40,000Correct
  2. BRs 6,00,000
  3. CRs 5,00,000
  4. DRs 6,60,000

Explanation

For supplies between related persons where goods are intended for further supply as such, the supplier may opt for 90% of the price charged by the recipient to an unrelated customer. 90% of Rs 60,000 is Rs 54,000 per tonne; for 10 tonnes it is Rs 5,40,000. Rs 6,00,000 ignores the 90% option. The second proviso does not apply since the recipient lacks full credit eligibility.

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