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CA Final · Indirect Tax Laws · Value of Supply

Gupta Electronics sold 10 televisions to Bharat Stores under an agreement made before the supply. The invoice of 1 July showed Rs 40,000 per television, with GST of 18%. The agreement provides for a 5% volume discount if payment is made within 30 days, and it is specifically linked to the relevant invoices. Bharat paid on 20 July, and Gupta issued a credit note for the discount and Bharat reversed ITC attributable to the discount. What is the value of supply on which Gupta's GST liability stands finally determined?

The final value is Rs 3,80,000. The 5% post-supply discount is excluded under section 15(3)(b) because it follows an agreement made before the supply, is linked to the invoices, and the recipient has reversed the related input tax credit.

  1. ARs 4,00,000
  2. BRs 3,80,000Correct
  3. CRs 3,60,000
  4. DRs 4,72,000

Explanation

Post-supply discount is excluded from value under section 15(3)(b) if it is established under an agreement at or before the supply, linked to specific invoices, and the recipient has reversed attributable ITC. All conditions are met. Value = 10 x 40,000 = 4,00,000 less 5% (20,000) = Rs 3,80,000. Rs 4,00,000 ignores the discount, and Rs 4,72,000 wrongly includes GST.

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