GST Jamku AIValue of taxable supply.
Section 15(1)
The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
In the realm of Goods and Services Tax (GST), Section 15(1) plays a crucial role in determining the value of a supply of goods or services. Let's break down the key elements of this section in simple terms.
Transaction Value: The Basis for Valuation
The value assigned to a supply is known as the transaction value. This value is essentially the price that is actually paid or payable for the specific supply of goods or services. It's important to note that this applies when the supplier and the recipient of the supply are not related parties.
Non-Related Parties and Sole Consideration
When the supplier (the one providing the goods or services) and the recipient (the one receiving them) have no familial or business relationship, and the price paid is the only consideration for the supply, Section 15(1) comes into play. In simpler terms, if there are no special ties between the supplier and the recipient, and the price is the only thing exchanged for the goods or services, the transaction value is the determining factor.
Putting It All Together
To sum it up, Section 15(1) of the GST law establishes that the value of a supply is based on the transaction value. This value is the actual price paid or payable when the supplier and recipient are not related, and the price forms the sole consideration for the supply. Understanding this section is crucial for businesses and individuals navigating the intricacies of GST regulations.
Section 15(2)
The value of supply shall include—
(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;
(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;
(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;
(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and
(e) subsidies directly linked to the price excluding subsidies provided by the Central Government and the State Governments.
Explanation.— For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.
Explaining section 15(2)
(a) Taxes, Duties, Cesses, Fees, and Charges
The value of supply encompasses any taxes, duties, cesses, fees, and charges imposed by prevailing laws. However, this excludes specific acts such as the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act, and the Goods and Services Tax (Compensation to States) Act. These should be separate charges imposed by the supplier.
(b) Liabilities Incurred by the Recipient
In addition to the actual price paid for goods or services, the value includes any amount the supplier is obligated to pay but has been covered by the recipient. This incorporates expenses not initially included in the transaction amount.
(c) Incidental Expenses
The supplier may charge incidental expenses, which involve commissions, packing fees, or charges for actions related to the supply. This includes services provided by the supplier before or during the delivery of goods or services.
(d) Interest, Late Fees, or Penalties
If there are any additional charges due to delayed payments for the supply, such as interest, late fees, or penalties, these are also considered part of the value of supply.
(e) Subsidies
While subsidies directly linked to the price are included in the supply value, those provided by the Central Government and State Governments are excluded. It's important to note that, for this provision, the amount of subsidy is integrated into the value of supply for the supplier who receives it.
Explanation for Sub-section
For clarification, the explanation under this sub-section emphasizes that subsidies are to be factored into the value of supply for the supplier benefiting from the subsidy.
Section 15(3)
The value of the supply shall not include any discount which is given—
(a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
(b) after the supply has been effected, if—
(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.
In the world of business transactions, understanding the value of the supply is crucial. Section 15(3) outlines specific conditions regarding discounts that can affect this value. Let's break down these conditions to make it simpler to grasp.
Discounts Before or at the Time of Supply (Subsection a)
When a discount is offered either before or at the time of the supply, it becomes a part of the value of the supply. However, there's a condition – this discount must be properly recorded in the invoice related to the supply. This ensures transparency and accuracy in accounting.
Discounts After the Supply (Subsection b)
Discounts given after the supply has been made are also considered in the value calculation. However, there are two conditions that must be met:
Pre-agreement Requirement: The discount should be established through an agreement made either at or before the time of the supply. This agreement should be specifically linked to the relevant invoices, providing clarity on the terms of the discount.
Input Tax Credit Reversal: If the supplier issues a document specifying the input tax credit attributable to the discount, the recipient of the supply must reverse this credit. In simpler terms, if the supplier has claimed a tax credit for the discount, the recipient needs to adjust their records accordingly.
In conclusion, Section 15(3) ensures that discounts, whether given before, at the time of, or after the supply, are appropriately accounted for in the value calculation. This promotes transparency and accuracy in financial transactions, benefiting both the supplier and the recipient.
Section 15(4)
Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.
In cases where the value of supplied goods or services cannot be figured out according to sub-section (1), it will be determined in a way specified by regulations.
When it's challenging to establish the value of the goods or services being supplied, Section 15(4) comes into play. This provision outlines that if the determination cannot be made as per sub-section (1), an alternative method will be applied. Let's delve into the details.
Value Determination under
The primary purpose of Section 15(4) is to provide a solution for situations where the value of supplied goods or services is elusive. Sub-section (1) outlines the standard procedure for determining value, but in cases where this method falls short, Section 15(4) steps in.
Prescribed Method
The crucial aspect of Section 15(4) is the use of a method as prescribed by regulations. This means that the specific way of determining the value is not left to interpretation but is instead defined by the established regulations. These regulations serve as a guide, ensuring consistency and fairness in determining the value of supplied goods or services.
Conclusion
Section 15(4) acts as a safeguard when the conventional method of determining the value of supplied goods or services is not applicable. By allowing for an alternative method as prescribed by regulations, it ensures a systematic approach to value determination, promoting clarity and consistency in the realm of goods and services supply.
Section 15(5)
Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.
Explanation.—For the purposes of this Act,—
(a) persons shall be deemed to be "related persons" if—
(i) such persons are officers or directors of one another's businesses;
(ii) such persons are legally recognised partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;
(b) the term "person" also includes legal persons;
(c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.
Determination of Value for Notified Supplies
In this section, the value of certain supplies will be determined as per the notification by the Government, following recommendations from the Council. This determination will override the guidelines mentioned in sub-sections (1) and (4), and the method of valuation will be as prescribed.
Explanation of Terms
For the purpose of this Act, the following definitions apply:
Related Persons
(a) Individuals are considered "related persons" under the following conditions:
- (i) They serve as officers or directors in each other's businesses.
- (ii) They are legally recognized partners in a business.
- (iii) They have an employer-employee relationship.
- (iv) One person owns, controls, or holds twenty-five percent or more of the outstanding voting stock or shares of both.
- (v) One person directly or indirectly controls the other.
- (vi) Both are directly or indirectly controlled by a third person.
- (vii) Together, they directly or indirectly control a third person.
- (viii) They are members of the same family.
(b) The term "person" includes legal entities.
(c) Persons associated in business, where one is the sole agent, distributor, or concessionaire of the other, are considered related.