09.04.2022- Learn the concept of Valuation under GST

Learn the concept of Valuation under GST

Every fiscal statute makes provision for determination of value as tax is normally payable on ad-valorem basis. In GST also, tax is payable on ad-valorem basis i.e. percentage of value of the supply of goods or services. Section 15 of the CGST Act and Rule 27 to Rule 35 of CGST Rules, 2017 contain provisions related to valuation of supply of goods or services made in different circumstances and to different persons.

Besides payment of tax, valuation is also important for determination of issues like threshold limit for availing exemption, threshold limit for opting composition scheme, monthly or quarterly filing of returns, requirement to generate E-invoice, requirement to generate E-way bill etc.

Let us understand the said provision through the practical Case Scenario

Case Scenario

Vishal Mart announced a discount of 10% as festive offer on all items. It also offered turnover discount of 5% after invoicing in a form of cashback if total sales after festive discount of 10% exceeds Rs. 10,000. Mr. A purchased various goods at different MRPs as follows:

S. No. Particulars of item purchased M.R.P. (in Rs.)
1. Machinery 7,000
2. Accessory 3,000
3. Spare Parts 2,000

Calculate the value of taxable supply and tax payable if all goods are taxable at 12%.


The taxable value of supply will be calculated as follows:

S. No. Particulars of item purchased M.R.P. (in Rs.) Taxable Value (in Rs.)
1. Machinery 7,000 6,300
2. Accessory 3,000 2,700
3. Spare Parts 2,000 1,800
  Total taxable value 12,000 10,800
  CGST @ 6%   648
  SGST @ 6%   648
  Total Invoice Price   12,096/-

The taxable value of this supply is Rs. 10,800.

Discount @ 5% will be given the form of cash-back, hence not deductible from taxable value, but a credit note is to be issued for this quantity discount.

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