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CA Final · Indirect Tax Laws · Value of Supply

Mehta Mobiles, Surat, sells a new phone for Rs 18,000 cash plus an old phone taken in exchange. The same new phone, without any exchange, is sold by Mehta Mobiles at Rs 22,000. The old phone is valued by Mehta at Rs 3,500. Ignoring GST, what is the value of supply of the new phone?

The value is Rs 22,000. Where consideration is not wholly in money, the open market value of the supply is taken first. Mehta sells the same phone without exchange at Rs 22,000, so that is the value, regardless of the old phone's value.

  1. ARs 18,000
  2. BRs 21,500
  3. CRs 22,000Correct
  4. DRs 25,500

Explanation

Rule 27(a) makes the open market value the value of supply where consideration is not wholly in money. The price of the new phone without exchange, Rs 22,000, is the open market value, as in the rule's illustration. Rs 21,500 and Rs 25,500 wrongly adjust for the old phone value, and Rs 18,000 ignores the non-monetary part.

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