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IS TAXABLE VALUE OF SUPPLY UNDER GST INCLUDES “SUBSIDY”

TRANSACTION VALUE:

Why analysis of transaction value is more important for arriving taxable value of any supply?

Unlike Central Excise which relies upon ‘assessable value’ for qualifying the duty, GST relies upon ‘transaction value’ for qualification and there appears to be no room to include notional additions.

As per section 15(1) of CGST Act, 2017 “The value of a supply of goods or services or both shall be the TRANSACTION VALUE, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the PRICE is the sole CONSIDERATION for the supply”

As per section 15(2) the value of supply shall include:-
(a)… (d)
(e) Subsidies directly linked to the price excluding subsidies provided by the central government and state government.

The term ‘Consideration’ defined in the act under section 2(31) as
Consideration in realtion to the supply of goods or services or both includes:-
(a) Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government.
(b) ……

ANALYSIS:

Transaction value has not been defined but is provided in this section itself as the ‘price’. Price is consideration in money terms. Value is the price that would be prevalent under controlled conditions.
1. Value of a supply of goods or services or both shall be the ‘Transaction Value’
2. ‘Transaction value’
a. which is the price actually paid or payable for the said supply of goods or service or both
b. where the supplier and the recipient of the supply are not related
c. and the price is the sole consideration for the supply

In addition to this PRICE, section 15(2) express checks to be carried out that can disqualify a price that is otherwise perfectly admissible are provided

Subsidy realized by supplier on the supply:- 

Clause (e) expressly provides for the limited exclusion of subsidy from value of supply, that is, subsidy given by the Government alone is excluded from value of supply. It is very clear that any form of price-intervention that behaves like subsidy is liable to be included in the value of supply.
Consideration does not includes any payment made or to be made whether in money or otherwise, in respect of, in response to, or for the inducement or, supply of goods or services or both by the central government or state government as subsidy.

CONCLUSION:

In the light of the above analysis it is very clear that ‘transaction value’ of supply of goods or services or both excludes subsidy only when it is received from central government or state government. However any transaction where there is any form of price-intervention that behaves like a subsidy is liable to be included in the value of supply except subsidy received from central government and state government.

NOTE:

The above interpretation made in the condition that both parties to the transaction are not related and price is the sole consideration for such supply.


Compiled By
CA.R.Jeyarajan FCA.,
(Chartered Accountant)
Reached at: jeyarajan@rareassociates.in

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Location: Thoothukudi, Tamil Nadu, India

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