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CA Final · Indirect Tax Laws · Value of Supply

Vardhan Steels Ltd supplies steel bars to Vardhan Traders Pvt Ltd, a related person which is not eligible for full input tax credit. The open market value and the value of like kind and quality are unavailable. The recipient resells the same bars as such to unrelated customers at Rs 50,000 per tonne. The supplier opts for the ninety per cent alternative under the proviso to rule 28. What is the value per tonne?

The value is Rs 45,000 per tonne. For related-party supplies of goods meant for further supply as such, the supplier may opt for ninety per cent of the price the recipient charges an unrelated customer. Ninety per cent of Rs 50,000 gives Rs 45,000.

  1. ARs 50,000
  2. BRs 55,000
  3. CRs 40,000
  4. DRs 45,000Correct

Explanation

The first proviso to rule 28(1) allows the supplier, where goods are intended for further supply as such by the recipient, to opt for 90% of the price charged by the recipient to an unrelated customer. 90% of Rs 50,000 is Rs 45,000. Since the recipient is not eligible for full credit, the second proviso (invoice value deemed open market value) does not apply.

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