GST is charged on the taxable value of a supply. So, even if you know the rate (say 18%), you must first decide the value of supply correctly (concept). Exams often ask:
You should be able to:
Valuation matters because:
Value of supply means the amount on which GST is calculated for a particular supply (concept). It is generally based on the price actually paid/payable, but adjusted for specified inclusions/exclusions.
Transaction value is the price actually paid or payable for the supply when supplier and recipient are not related and price is the sole consideration (concept).
In simple words: if it is a normal sale at a genuine price, transaction value is the base.
Transaction value is generally accepted when:
If these conditions are not satisfied, valuation rules/methods may apply.
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Any three inclusions (concept/overview):
Write any three items in points/table form.
Discount treatment (basics) (concept):
Write any three clear points.
Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the supply of goods and services. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.
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GST is charged on the taxable value of a supply. So, even if you know the rate (say 18%), you must first decide the value of supply correctly (concept). Exams often ask:
You should be able to:
Valuation matters because:
Value of supply means the amount on which GST is calculated for a particular supply (concept). It is generally based on the price actually paid/payable, but adjusted for specified inclusions/exclusions.
Transaction value is the price actually paid or payable for the supply when supplier and recipient are not related and price is the sole consideration (concept).
In simple words: if it is a normal sale at a genuine price, transaction value is the base.
Transaction value is generally accepted when:
If these conditions are not satisfied, valuation rules/methods may apply.
Common additions (concept/overview):
At a basic level, exclude:
Discounts can reduce taxable value if properly documented and conditions are met (concept). Practical exam-friendly points:
Write “as per GST rules/conditions” in exams if detailed conditions are out of syllabus.
Assume goods value 50,000. Packing charges 2,000. Discount shown on invoice 1,000. GST rate 18%.
Note: GST is calculated on taxable value; GST itself is not included in value (concept).
Valuation rules may apply when:
If transaction value cannot be used, valuation may be based on (overview):
Start
|
v
Can we use transaction value? (not related + sole consideration)
| Yes
v
Base price (paid/payable)
|
v
Add inclusions (packing/commission/charges etc.)
|
v
Less eligible discounts (properly documented)
|
v
Taxable value -> Apply GST rate -> Tax amount
|
v
If transaction value not acceptable -> apply valuation rules/methods (overview)
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Value of supply is the taxable value on which GST is computed. Generally, it is based on transaction value (price paid/payable) when parties are not related and price is the sole consideration (concept).
Conclusion: Correct valuation ensures correct GST payment and compliance (concept).