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CMA Intermediate · Direct and Indirect Taxation · Time and Value of Supply

Arjun Pan Products Pvt Ltd supplies pan masala (tariff item 2106 90 20) covered by Rule 31D. Its packages declare different maximum retail sale prices: Rs 118 on the label of one side of the pack and Rs 141.60 on the other side. Before a supply, the company stamps over and increases the declared price to Rs 177. Assume applicable tax is IGST at 18% only. The value of supply per pack is:

The value is Rs 150 per pack. Under Rule 31D, the altered, increased retail sale price of Rs 177 is deemed to be the RSP. Tax inside it is 177 x 18/118, which is Rs 27, so the value is Rs 177 less Rs 27, equal to Rs 150.

  1. ARs 100
  2. BRs 120
  3. CRs 150Correct
  4. DRs 177

Explanation

Where more than one RSP is declared, the maximum applies; where the declared RSP is altered upward before the supply, the altered RSP is deemed to be the RSP. So the RSP is Rs 177. Tax = 177 x 18/118 = Rs 27. Value = 177 - 27 = Rs 150. Rs 120 comes from using Rs 141.60 (141.60 x 100/118), ignoring the increase.

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