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CA Final · Indirect Tax Laws · Value of Supply

Mehta Appliances, Ahmedabad, supplies a new refrigerator to a customer for Rs 28,000 in cash plus the exchange of the customer's old refrigerator. The same model refrigerator is sold by Mehta Appliances to other customers without any exchange for Rs 34,000. Applying rule 27 of the CGST Rules, the value of supply of the new refrigerator is:

The value is Rs 34,000. When consideration is not wholly in money, the first preference under rule 27 is the open market value of the supply. The price charged for the same model without exchange is Rs 34,000, so the cash of Rs 28,000 is not the value.

  1. ARs 28,000
  2. BRs 34,000Correct
  3. CRs 31,000
  4. DRs 6,000

Explanation

Where consideration is not wholly in money, rule 27(a) takes the open market value of the supply as the value. The open market price without exchange is Rs 34,000, as in the phone illustration. Rs 28,000 ignores the non-money consideration (the old refrigerator).

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