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CA Intermediate · Taxation · Value of Supply

Anand Textiles, Surat, supplies goods to its sister concern Anand Fashions (a related person, Surat) for Rs 70,000. The open market value of identical goods supplied at that time is Rs 1,00,000, and Anand Fashions is not eligible for full input tax credit. Both are registered. Under the CGST Valuation Rules, what is the value of supply?

The value of supply is Rs 1,00,000. Because the supplier and recipient are related and the price is influenced by that relationship, the invoice price is not accepted, and the open market value of identical goods is adopted as the value of supply.

  1. ARs 70,000
  2. BRs 85,000
  3. CRs 1,00,000Correct
  4. DRs 1,15,000

Explanation

When parties are related, the transaction value is not accepted if the price is influenced by the relationship. Here the recipient is not entitled to full ITC and the price is below open market value, so the value is the open market value of Rs 1,00,000. Rs 70,000 is the invoice price and is not accepted.

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