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CA Intermediate · Taxation · Value of Supply

Ravi & Co., Jaipur, a registered supplier, supplies goods to its distinct-person branch in Gujarat (stock transfer) of a kind for which the goods are not intended for further supply as such by the recipient, and there is no open market value or like-kind supply value available. The cost of production of the goods is Rs 1,20,000. Under Rule 30 of the CGST Rules, the value is 110% of cost of production. A further Rs 5,000 of freight is borne separately by the branch with a third-party transporter. What is the value of supply?

The value is Rs 1,32,000, being 110% of the cost of production of Rs 1,20,000 under the residual valuation rule. The Rs 5,000 freight paid separately by the branch to a third-party transporter is not added.

  1. ARs 1,32,000Correct
  2. BRs 1,20,000
  3. CRs 1,37,000
  4. DRs 1,38,500

Explanation

Rule 30 gives 110% of cost of production when valuation by Rules 27 to 29 is not possible. Value = 1,20,000 × 110% = Rs 1,32,000. The freight is paid by the branch to a third party and is not part of the supplier's price, so it is not added.

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