GST would be levied on value of goods and services transacted. Valuation provision would be common for both CGST as well as SGST. There is no specific information on this issue in any of the reports except that provisions would be simpler and more transparent. GST will be charged on Value of goods/services supplied, where the value will be the transaction value i.e. the price actually paid or payable. Where the supply consists of both taxable and non-taxable supply, the taxable supply shall be deemed to be for such part of the monetary consideration as is attributable thereto. The transaction value shall be accepted even where the supplier and recipient of supply are related, provided that the relationship has not influenced the price.
2. Valuation by Comparison
Where the value of a supply cannot be determined under the above provisions, the value shall be determined on the basis of the transaction value of goods and/or services of like kind and quality supplied at or about the same time to other customers. In determining the value of goods and/or services the proper officer shall take into consideration the following factors –
(a) difference in the dates of supply,
(b) difference in commercial levels and quantity levels,
(c) difference in composition, quality and design between the goods and/or services being valued and the goods and/or services with which they are compared,
(d) Difference in freight and insurance charges depending on the place of supply.
3. Computed value method
If the value cannot be determined as per above provisons, it shall be based on a computed value which shall include the following:-
(a) the cost of production, manufacture or processing of the goods or, the cost of provision of the services;
(b) charges, if any, for the design or brand;
(c) An amount towards profit and general expenses equal to that usually reflected in supply of goods and/or services of the same class or kind as the goods and/or services being valued which are made by other suppliers.
4. Residual method
Where the value of the goods and/or services cannot be determined under any of the provisions, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules.
5. Valuation in certain cases
5.1 Pure Agent
Notwithstanding anything contained in these rules, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely:-
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods and/or services procured;
(ii) the recipient of service receives and uses the goods and/or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and/or services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods and/or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
5.2 Money Changer
The value of taxable service provided for purchase or sale of foreign currency, including money changing, shall be determined by the service provider in the following manner:-
For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time(where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received, by the person changing the money), multiplied by the total units of currency:
In case where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI.
6. Rejection of declared value
6.1 Reasonable doubt regarding the transaction value
- When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any goods and/or services, he may ask the supplier to furnish further information, including documents or other evidence and if and even after receiving such further information (or in the absence of any response from such supplier) the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such goods and/or services cannot be determined.
- The reasons to doubt the truth or accuracy of the value of the supply declared by the supplier shall include, but not be limited to the following:
- the significantly higher value at which goods and/or services of like kind or quality supplied at or about the same time in comparable quantities in a comparable commercial transaction were assessed;
- the significantly lower or higher value of the supply of goods and/or services compared to the market value of goods and/or services of like kind and quality at the time of supply; or
- any mis-declaration of goods and/or services in parameters such as description, quality, quantity, year of manufacture or production.
6.2 The proper officer shall intimate the supplier in writing the grounds for doubting the truth or accuracy of the value declared in relation to the supply of goods and/or services by such supplier and provide a reasonable opportunity of being heard, before taking a final decision.