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CMA Intermediate · Direct and Indirect Taxation · Computation of GST Liability

Gupta Ltd supplies goods to its sole distributor Rao Pvt Ltd at Rs 6,00,000 as the price actually paid, and the price is the sole consideration. Separately, Gupta receives a Rs 50,000 subsidy from the State Government and a Rs 30,000 price-linked subsidy from a private trust. Both subsidies relate to this supply. Which is the correct treatment under section 15?

Because a sole distributor is deemed a related person, the transaction value rule in section 15(1) does not apply, and the value must be determined in the manner prescribed under section 15(4), rather than by simply adding the price and subsidies.

  1. ATransaction value rule is applied; value is Rs 6,30,000
  2. BParties are related, so transaction value rule under sub-section (1) does not apply; value is determined as prescribedCorrect
  3. CValue is Rs 6,80,000
  4. DValue is Rs 6,50,000 as only the State subsidy is included

Explanation

Under the Explanation (c), a sole distributor and the supplier are deemed related. Section 15(1) transaction value applies only to unrelated persons, so value must be determined as prescribed under sub-section (4). The subsidy treatment cannot be finalised by the simple addition; the options adding amounts wrongly assume the transaction value applies.

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