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CA Intermediate · Taxation · Value of Supply

Kapoor Appliances, Pune, supplies a washing machine to a customer at a list price of ₹40,000. Under a trade scheme announced and recorded in the invoice at the time of supply, a discount of 10% is given. In addition, the supplier gives a post-supply discount of ₹2,000 under a pre-existing agreement known at the time of supply, linked to the specific invoice, and the recipient reverses the proportionate input tax credit. The supplier also levies ₹1,500 as delivery charges. Ignoring GST, what is the value of supply?

The value of supply is ₹35,500. The invoice discount of ₹4,000 and the post-supply discount of ₹2,000 are both deductible because the latter was agreed at or before the supply, is linked to the invoice, and ITC is reversed. Delivery charges of ₹1,500 are added.

  1. A₹35,500Correct
  2. B₹37,500
  3. C₹36,000
  4. D₹39,500

Explanation

Discount of 10% = ₹4,000, shown on the invoice, is excluded. The post-supply discount of ₹2,000 is allowed as it was agreed before or at the time of supply and is linked to the invoice, with ITC reversed by the recipient. Value = 40,000 − 4,000 − 2,000 + 1,500 = ₹35,500. ₹37,500 ignores the post-supply discount deduction and ₹36,000 omits the delivery charge.

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