GST - Some practical aspects of Valuation : Part I

May 11,2017
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Shyamsunder Nori, Chartered Accountant

One of the important characteristic of a good indirect tax system is that the valuation rules should be simple and easy to understand and calculable with reasonable precision.  

In this article, an attempt is being made to analyse the draft rules of ‘Determination of value of supply’ tentatively approved by GST Council which will be the basis for valuation in GST regime. Also we look at the requirement of payment of invoice within 180 days as a condition to take input tax credit vis-à-vis stock transfers. The provisions of Valuation as contained in the CGST Act and the Draft Rules cover the following situations that need to be distinctly considered for valuation purpose:

  1. Where supply of goods or services is made for a consideration not wholly in money.
  2. Where supply of goods or services or both is made between distinct persons (Stock & branch transfers)
  3. Where supply of goods or services or both is made between related persons

Before we deal with the specific valuation issues let us look at some of the provisions of Central Goods and Services Tax Act, 2017 (CGST Act) that are of relevance.

Section 7 (1) (c) of the CGST Act brings in certain activities specified in Schedule I to the CGST Act within the scope of supply. These activities in the absence of consideration would not fall within the frame work of taxable event – supply. Hence the deeming provision to bring them within the meaning of supply. One such activity enumerated in Schedule I is supply of goods or services or both between related persons or between distinct persons when made, in the course or furtherance of business, for no consideration.  

Section 24 of the CGST Act requires a person having multiple places of business across States India to take registrations for each such State.

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