Gain Insight On The Valuation Provisions Under GST Act

WEEKEND MCQ SELF CHALLENGE #011 — VALUATION PROVISIONS UNDER GST

Valuation Provisions under GST

Dear Professional Seniors & Friends,

Welcome to this wonderful weekend MCQ self-challenge!

This weekend's challenge is on valuation provisions under the GST Act having 5 MCQs to be self-answered by participants to take self challenge. The

objective of this post is to discuss the various valuation provisions to be kept in mind while computing the value of supply. The detailed

answers to these MCQs shall be posted on Monday for the self-assessment of the participants. As the best tax consultant in Gurgaon, we have this post for you and it shall be of immense use to the participant.

Weekend MCQ 11.1: When can the transaction value be rejected for computation of the value of supply?

(A) When the buyer and seller are related and the price is not the sole consideration.

(8) When the buyer and seller are related or price is not the sole consideration.

(C)It can never be rejected.

(D) When the goods are sold at very low margins.

Weekend MCQ 11.2: A Ltd. Supplies Laptop to Mr B at Rs 50000. In addition to this, the following were paid:-

• Import Duty Paid By A - Rs 3000
• Freight Paid By B — Rs 500
• Packing Exp Paid By A Rs 300

The value of Supply will be Rs

(A) Rs 50,000

(B) Rs 53,000

(C)Rs 53,500

(D) Rs 53,800

Weekend MCQ 11.3: A new phone is supplied for Rs 20,000 along with the exchange of an old phone worth Rs 2.000. The price of the new phone without exchange is Rs 24,000. What will be the value of supply?

(A) RS 20,000

(B) Rs 22,000

(C) Rs 24,000

(D) Rs 26,000

Weekend MCQ 11.4: A Laptop is supplied for Rs 40,000 along with a barter printer that is manufactured by the recipient and the value of the printer known at the time of supply is Rs 4,000, but the open market value of the laptop is not known. What will be the value of supply?

(A) Rs 40,000

(B) Rs 4.000

(C) Rs 44,000

(D) Rs 48,000

Weekend MCQ 11.5: MrX is dealing in buying and selling second-hand goods. He has purchased a second-hand AC worth Rs 5,000 and

selling that to Mr. Y for Rs 8,000 without any further processing. Mr. X has not claimed ITC on purchase. What will be the value of supply?

(A) Rs 5,000

(6) Rs 8,000

(C) Rs 13,000

(D) Rs 3,000

Answer MCQ Self Challenge #011

“This post of MCQ is on the valuation provisions under GST since it is an essential tool to determine the value of supply on which GSTs to levy.

Answer to MCQ 11.1: B)

Answer to MCQ 11.2: D)

Answer to MCQ 11.3: C)

Answer to MCQ 11.4: C)

Answer to MCQ 11.5: D)

Practical Analysis for MCQ 11.1

• As per Section 15(1) of the CGST Act, the taxable value will be the transaction value i.e. price actually paid or payable if the following both conditions are satisfied —

1. Parties are not related

2. Price is not the sole consideration

• So if any of the above conditions is not fulfilled, then transaction value shall be rejected for computation of value of supply.

Based on the above analysis, the correct answer to MCQ 11.1: B) When the buyer and seller are related or price is not the sole consideration.

Practical Analysis for MCQ 11.2

• As per Section 15(2) of the CGST Act, the following shall be included for computing value of supply —

(a) any taxes, duties, cesses, fees 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 about 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;

(q) 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 State Governments.

• Valuation in our case will be Rs 50000 +3000 +500 +300 = Rs 53800

Sec 15(1) 15(2)a) 15(2)(b) 15(2)(c)

Based on the above analysis, the correct answer to MCQ 11.2: D) is Rs 53,800.

Practical Analysis for MCQ 11.3 & 11.4

• Sec 15(4) of the CGST Act provides where the value of the Supply of goods or services or both cannot be determined under sub-section (1)
  ie. transaction value, the same shall be determined by following the valuation rules prescribed
• Rule 27 of CGST Rules talks about the Value of the supply of goods or services where the consideration is not wholly in money.
• As per that rule, the value of supply shall --

(a) be the open market value of such supply;

(b) if the open market value is not available under clause (a), be the sum total of consideration in money and any such further amount in

‘money as is equivalent to the consideration not in money, if such amount is known at the time of supply:

(c) if the value of supply is not determinable under clause (a) or clause (bj, be the value of supply of goods or services or both of like kind and

quality;

(d) if the value is not determinable under clause (a) clause (b) or clause (c), be the sum total of consideration in money and such further

amount in money that is equivalent to consideration not in money as determined by the application of rule 30 or rule 31 in that order.

Based on the above analysis, the correct answer to MCQ 11.3: C) Rs 24,000 since the open market value of the mobile phone is available which is Rs

24,000 as per Rule 27(a) of CGST Rules and Correct answer to MCQ 11.4: C) Rs 44,000 since the open market value of the laptop is not available, but

the sum total of consideration in money i.e. Rs 40,000 and such amount as is equivalent to the consideration not in money i.e. Rs 4,000 will be

Rs 44,000 as per Rule 27(b) of CGST Rules.

Practical Analysis for MCQ 11.5

• Rule 32 of CGST Rules talks about the determination of value concerning certain supplies. Sub-rule 5 of that rule provides for valuation in case of a supply of second-hand goods.
• As per that rule, Where a taxable supply is provided by a person dealing in buying and selling of second-hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored.

Based on the above analysis, the correct answer to MCQ 11.5 : D) is Rs 3,000 (Rs 8,000 - Rs 5,000).

(Disclaimer: The objective of the MCQ post is just to discuss the concept. it may happen, by change of facts, the answer may be different.

Please do not treat this as a professional opinion; you can definitely have your own opinion.)

Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9810116321