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CA Intermediate · Taxation · Value of Supply

Nandini Foods supplies packed snacks to a retailer. The list price is Rs 1,00,000. The invoice shows a trade discount of Rs 5,000 as per an agreement made before the supply, and the discount is duly shown on the invoice. The supplier also collects Rs 3,000 as the retailer’s share of an advertisement cost that the supplier incurred on behalf of the retailer, charged on the same invoice as part of consideration for supply. Assuming no other items, what is the value of supply?

The value is Rs 98,000. The Rs 5,000 discount agreed before supply and shown on the invoice is deducted from Rs 1,00,000, while the Rs 3,000 expense incurred by the supplier on the recipient's behalf is charged as part of consideration and is added back.

  1. ARs 95,000
  2. BRs 98,000Correct
  3. CRs 1,03,000
  4. DRs 1,00,000

Explanation

The pre-agreed discount shown on the invoice is deducted: 1,00,000 − 5,000 = 95,000. Amounts the supplier incurs on behalf of the recipient and charges as part of the consideration are includible: +3,000. Value = Rs 98,000. Rs 95,000 omits the charge.

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