Skip to content

CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Value of Supply

Mehta Ltd supplies goods to Nair Ltd, an unrelated buyer, for Rs 2,00,000. Without any prior agreement, after the supply Mehta Ltd issues a credit note giving a Rs 10,000 discount as a goodwill gesture. Nair Ltd reverses the related ITC. What is the value of supply for the original transaction?

The value remains Rs 2,00,000. A post-supply discount qualifies for exclusion only when it rests on an agreement made at or before the supply and is linked to invoices, in addition to ITC reversal by the recipient. A goodwill discount without prior agreement fails this test.

  1. ARs 1,90,000
  2. BRs 2,10,000
  3. CRs 1,95,000
  4. DRs 2,00,000Correct

Explanation

A post-supply discount is excluded only if it is established by an agreement at or before the time of supply and linked to invoices, and ITC is reversed. Here there was no prior agreement, so the first condition fails even though ITC was reversed. Value stays Rs 2,00,000; Rs 1,90,000 wrongly treats ITC reversal as sufficient.

Did you get it right without looking?

One question tells you little. A timed set on Value of Supply shows your real accuracy, how long you take and where you lose marks.

Practise Value of SupplyFree diagnostic mock

More Value of Supply questions