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CA Final · Indirect Tax Laws · Value of Supply

Ganga Appliances sells a washing machine to a customer for Rs 22,000 in cash plus the exchange of the customer's old machine. The same washing machine is sold by Ganga to other customers without any exchange at Rs 28,000. The supplier estimates the old machine's resale value at Rs 5,000. What is the value of supply of the new machine under rule 27 of the CGST Rules?

The value is Rs 28,000. Where consideration is not wholly in money, rule 27(a) first uses the open market value of the supply. The same machine is sold without exchange at Rs 28,000, so that price applies and the estimated value of the old machine is irrelevant.

  1. ARs 22,000
  2. BRs 27,000
  3. CRs 28,000Correct
  4. DRs 33,000

Explanation

Rule 27(a) makes the open market value the value where consideration is not wholly in money. The open market value, the price without exchange, is available at Rs 28,000, so the other clauses are not reached. Rs 27,000 adds the estimated resale value, which applies only if open market value is unavailable.

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