Supply’ is a fundamental concept and all the provisions of GST revolve around it. The three key components under GST are Value of Supply, Time of Supply and Place of Supply.

Determining Value of Supply

Value of supply means the money that a buyer owes to a seller for the goods and services supplied. The amount that the seller collects by the seller from the buyer is the Value.

GST is applicable on the ‘transaction value’. Transaction value is the price actually paid (or payable) for the supply of goods/services between unrelated parties (i.e., price is the sole consideration).

The value of supply under GST will include:

  1. Any taxes, duties, cess, fees, and charges levied under any act, except GST. If the supplier charges GST Compensation Cess separately, he should exclude it.
  2. Any amount that the supplier is liable to pay which the recipient incurred and did not include in the price.
  3. All incidental expenses in relation to sale such as packing, commission etc.
  4. Subsidies linked to supply, except Government subsidies.
  5. Interest/late fee/penalty for delayed payment of consideration.

A trader will charge GST on the ‘transaction value’ if:

  • there is a relation between the parties
  • they did not charge a reasonable value
  • the transaction took place as a barter or exchange

Discounts

Traders can deduct discounts given before or at the time of supply from transaction value. Discounts given after supply will be allowed only if-

  1. The buyer mentions about it in the agreement entered into before sale and
  2. It can be clearly tracked to the relevant tax invoice.
  3. The recipient has reversed Input tax credit proportionate to the discount and

Valuation of supply when a transaction is not in INR.

The taxpayer will raise the invoice in Foreign currency if the taxpayer exports the goods. The IGST (if any) charged in the invoice will be converted to INR using RBI Exchange Rate.

Traders should use RBI exchange rates in case of imports too. When reverse charge is applicable on imported supplies, the trader will convert invoice amount using the RBI Exchange Rate.