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CA Intermediate · Taxation · Value of Supply

Mehta Industries (Surat) supplies machinery to Kapoor Ltd for Rs 5,00,000. Mehta also charges Rs 20,000 for packing, Rs 30,000 for transportation to Kapoor's site (Mehta arranges it and charges it on the same invoice), and Rs 15,000 as interest for late payment of the invoice. Kapoor also pays Mehta a separate Rs 10,000 as a subsidy-free incidental installation charge that Mehta bills on the same invoice. Which amount is the value of supply, before GST?

The value of supply is Rs 5,75,000. Section 15(2) includes incidental expenses such as packing, transport and installation charged by the supplier, and interest for late payment, along with the price of Rs 5,00,000. Adding 20,000, 30,000, 10,000 and 15,000 gives the total.

  1. ARs 5,75,000Correct
  2. BRs 5,50,000
  3. CRs 5,60,000
  4. DRs 5,65,000

Explanation

Under Section 15(2), packing, transport charged by the supplier, incidental expenses and interest for late payment are all included. Total = 5,00,000 + 20,000 + 30,000 + 15,000 + 10,000 = Rs 5,75,000. Rs 5,60,000 wrongly leaves out the late payment interest and installation.

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