GST - Some practical aspects of Valuation : Part III

June 07,2017
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Shyamsunder Nori, Chartered Accountant

In this final and concluding Part on valuation under GST we look at the valuation rules approved by the GST Council as compared to the draft rules released earlier, the interplay between the valuation rules and rules for input tax credit and finally the consequential impact under GST arising from adjustments under transfer pricing provisions of Income-tax.

Revised Valuation Rules: 

The GST Council has recently approved the revised Valuation Rules. The important changes as compared to the earlier draft version dealt in Part I are:

1. A new proviso has been inserted to Rule 2 dealing with value of supply of goods or services or both between distinct or related persons, other than agent, and it reads as under:

“Provided that where goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person”.

2. Rule 9 inserted to prescribe method to determine tax value for a supply inclusive of tax.

3. The proviso for enabling declared value to be deemed open market value where recipient is entitled for full tax credit is retained.

The new proviso to Rule 2 is a welcome move. This is better explained by below illustration

Illustration 1: ABC Ltd a detergent manufacturer has a manufacturing unit in Gujarat and it makes an interstate stock transfers of free samples to its depot in Maharashtra. The depot supplies the goods through distributors within the State of Maharashtra. The depot invoices the distributors for a supply of standard pack at Rs 100.


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