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CMA Final · Indirect Tax Laws and Practice · Valuation under GST

Kaveri Tobacco Co. packs a product covered by Rule 31D with a printed RSP of ₹590 per pack and supplies 1,000 packs inter-State. After dispatch from the factory, but before the goods reach the retailer, the company stickers an increased RSP of ₹708 on every pack. Assume the applicable IGST is 18%. The deemed value of supply per pack is:

The deemed value is ₹600 per pack. Since the RSP was increased to ₹708 after dispatch, the altered price is treated as the retail sale price under Rule 31D. Tax of 708 × 18/118 = ₹108 is removed, leaving ₹600.

  1. A₹500, based on the original RSP of ₹590
  2. B₹600, based on the altered RSP of ₹708Correct
  3. C₹708, since the RSP is not reduced by tax
  4. D₹649, the average of the two RSPs after removing tax

Explanation

Explanation clause (d) says that where the declared RSP is altered to increase it at any stage before, during or after the supply, the altered RSP is deemed the retail sale price. Tax = 708 × 18/118 = ₹108; value = 708 − 108 = ₹600. Check: 600 × 1.18 = 708. The ₹500 option ignores the upward alteration.

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