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CA Intermediate · Taxation · Value of Supply

Sharma Furnishers, Jaipur (registered), sold furniture to Mehta Traders, Jaipur, for a price of Rs 80,000 plus GST at 18%. The invoice states: 'If payment is made within 10 days, a discount of 5% on the price will be allowed.' The discount was agreed before or at the time of supply and is linked to the invoice, and Mehta paid within 10 days; Sharma has reversed the ITC attributable to the discount, if applicable. What is the value of supply?

The value of supply is Rs 76,000. A discount stated on the invoice and agreed at the time of supply is excluded from value, so the 5% discount of Rs 4,000 reduces Rs 80,000. GST is not part of the value of supply.

  1. ARs 80,000
  2. BRs 76,000Correct
  3. CRs 94,400
  4. DRs 89,680

Explanation

Under section 15(3)(b), a discount given after supply is excluded only if agreed before or at the time of supply, specifically linked to the relevant invoice, and ITC is reversed by the recipient. Here the discount was established in the invoice itself, so it is deductible. Discount = 5% of 80,000 = 4,000. Value = 80,000 - 4,000 = Rs 76,000. Rs 80,000 ignores the discount; the other options include GST.

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