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Determination of value in respect of specific supplies

Valuation Rules prescribes methods to determine the Taxable value of five specific supplies

Purchase or sale of foreign currency including money changing

Option-1

Case 1 – Transaction where one of the currencies exchanged
is Indian Rupees

  • Taxable value is the difference between buying rate or selling rate of currency and RBI reference rate for that currency at the time of exchange multiplied by total units of foreign currency.
  • However, if RBI reference rate is not available then the taxable value is 1% of the gross amount of Indian Rupees provided/received by the person changing the money.

Case 2: Transaction where neither of the currencies exchanged is Indian Rupees

Taxable value will be 1% of the lesser of the two amounts the person changing the money would have received by converting (at RBI reference rate) any of the two currencies in Indian Rupees.

Option-2

The person supplying the service may also exercise the following option to ascertain the taxable value, however once opted then he cannot withdraw the during the remaining part of the financial year: –

  • One percent of the gross amount of currency exchanged for an amount up to one lakh rupees,
    subject to minimum amount of two hundred and fifty rupees.
  • One thousand rupees and half of a percent of the gross amount of currency exchanged for an
    amount exceeding one lakh rupees and up to ten lakh rupees.
  • Five thousand rupees and one-tenth of a percent of the gross amount of currency exchanged for an amount exceeding ten lakhs rupees subject to maximum amount of sixty thousand rupees.

Service of booking of tickets by an air travel agent

Taxable value is

  • 5% of basic fare in case of domestic travel
  • 10% of basic fare in case of international travel.

Basic Fare –  Basic fare means that part of the airfare on which commission is normally paid to the air travel agent by the airline.

Life insurance business –

  • Where policy has dual benefits of risk coverage and investment – Taxable value is the gross premium charged less amount allocated for investments or savings if such allocation is intimated to the policyholder at the time of collection of premium.
  • Single premium annuity policy where allocation for investments and savings is not intimated to the policy holder – taxable value is ten percent of the single premium charged from the policyholder.
  • Other cases- Twenty-five percent of the premium charged from the policyholder in the first year and twelve-and-a-half percent of the premium charged for subsequent years.

However, where insurance policy has the benefit of risk coverage only, then the taxable value is the entire premium charged from the policyholder.

Value of second-hand goods

  • The taxable value of supply of second-hand goods i.e. used goods as such or after such minor processing which does not change the nature of goods shall be the difference
    between the purchase price and the selling price, provided no input tax credit has been availed on purchase of such goods.
  • However, if the selling price is less than the purchase price, that negative value will be ignored.

Value of supply of goods repossessed from a defaulting borrower.

  • If the defaulting borrower is not a registered person, the purchase value will be purchase price in the hands of such borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and date of disposal by the person making such repossession.
  • However, if the defaulting borrower is registered, the repossessing lender agency will discharge GST at the supply value without any reduction from actual/notional purchase value.

Value of redeemable vouchers/stamps/coupons/tokens

Money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.

Valuation in the case of supply of lottery

  1. Lottery run by State Government – Value of supply of lottery shall be 100/112 of the face value or the price notified in the Official Gazette by the organizing State, whichever is higher.
  2. Lottery authorized by State Government – 100/128 of the face value or the price notified in the Official Gazette by the organizing State, whichever is higher.

The rate of exchange of currency, other than Indian rupees, for determination of value

The rate of exchange for determination of value of taxable goods or services or both shall be the applicable RBI reference rate for that currency on the date of time of supply as determined in terms of section 12 or section 13 of the CGST Act.

Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax

Where the value of supply is inclusive of GST, the tax amount shall be determined in the following manner,
Tax amount= (Value inclusive of taxes X GST tax rate in %)/(100+ sum of GST tax rates in %)
For example –
If the value inclusive of tax is Rs. 100/- and applicable GST tax rate is 18% then
Tax amount = (100×18)/ (100+18) = 1800/118=Rs. 15.25

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