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CA Intermediate · Taxation · Value of Supply

Gupta & Sons, Lucknow, a registered supplier, receives ₹1,18,000 as the total invoice amount from a customer for a supply of taxable goods, which is inclusive of GST at 18%. No other charges apply. What is the value of supply on which tax is payable?

The value of supply is ₹1,00,000. When the invoice amount includes GST, the taxable value is obtained by backward calculation, dividing the total by 118 and multiplying by 100, giving ₹1,00,000 with tax of ₹18,000. Deducting 18% of the total is incorrect.

  1. A₹1,18,000
  2. B₹1,00,000Correct
  3. C₹96,760
  4. D₹1,06,200

Explanation

Where the price is inclusive of GST, the tax is cum-tax and the taxable value is found by dividing by 1.18 (Rule 35). Value = 1,18,000 × 100/118 = ₹1,00,000, and GST = ₹18,000. Subtracting 18% of 1,18,000 gives ₹96,760, which wrongly applies the rate on the inclusive amount.

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