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CA Intermediate · Taxation · Value of Supply

Ravi Textiles, Surat, supplies goods to its related person, Ravi Garments, who is a registered person and entitled to full input tax credit. The open market value of identical goods is Rs 1,00,000, but Ravi Textiles invoiced them at Rs 70,000. Under the CGST Rules, what is the value of supply?

The value is Rs 70,000. For supplies between related or distinct persons, where the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value, so the invoice value is accepted.

  1. ARs 1,00,000 in all cases
  2. BRs 70,000, since the recipient is entitled to full ITC and the invoice value may be acceptedCorrect
  3. CRs 85,000, being the average
  4. DRs 30,000, being the difference

Explanation

Under the Valuation Rules, where the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value of the supply. So Rs 70,000 stands. Rs 1,00,000 would apply only if the recipient were not fully eligible for credit.

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