09.05.2022- Learn the concept of Valuation in GST

Learn the concept of Valuation in GST

Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter i.e., Rule 27, 28 and 29, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services. (Rule 30)

Let us understand the said provision through the practical Case Scenario.

Case Scenario

Mr. Ramesh provided taxable services to Mr. Suresh. Open market value of service and like kind and quality of service is also not available. Calculate the taxable value of supply of service under Rule 30 of CGST rules, 2017, given the following expenditures as incurred by the supplier on provision of this particular service:

Cost of material consumed    : Rs. 2,000/-
Direct employees cost    : Rs. 22,000/-
Direct expenses  : Rs. 2,000/-
Research and development cost   : Rs. 5,000/-
Administration overheads related to provision of service   : Rs. 4,000/-
Abnormal costs  : Rs. 2,000/-
Depreciation    : Rs. 3,000/-


In accordance with the guidelines of CAS-4, Cost of production or acquisition or supply of goods or provision of services shall be determined on ‘normal cost’ basis. For this purpose, any abnormal and non-recurring costs, abnormally low plant utilization, abnormal rejections, accidents, strikes, fires, unexpected Court orders etc. shall be ignored.

The cost of provision of service will be calculated as follows:

S. No. Particulars Amount (in Rs.)
  Cost of material consumed 2000
+ Direct employees cost 22000
+ Direct expenses 2000
+ Research and development cost 5000
+ Administration overheads related to provision of service 4000
+ Depreciation 3000
  Cost of provision of service 38000

Value of taxable Supply (Rule 30) = 110% * Cost of provision of service

= 110% * Rs. 38000 = Rs. 41,800/-.

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