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How to Calculate Taxable Value under GST

How to determine Taxable Value of Goods

GST is Calculated on Taxable Value of Goods or Services, but you might have a question- “What is Taxable Value? and How to Calculate Taxable Value?“on which GST Rate shall be applicable. In this post, you will get an understanding of What is Taxable Value, What to add in Taxable Value and What to Deduct in Taxable.

 What is Taxable Value?

  • Taxable value is the transaction value (price actually paid or payable) excluding GST, provided the parties to transactions are not related and the price is the only consideration (i.e there should not be any exchange, other benefit etc.)
  • However, in specific transactions such as parties to transactions are related or the price is not the only consideration, value shall be calculated as per Value of Supply Rules.

Compulsory Inclusions in Taxable Value

  • Any taxes (like local taxes), fees, charges levied other than GST;
  • Expenses done by the recipient on behalf of the supplier of Goods or Service;
  • Expenses relating to packing & commission incurred by the supplier;
  • Penalty, Interest and Late fees charged for delayed payment; and
  • Direct subsidies (except government subsidies)

are to be added to the price (if not already added) to arrive at the taxable value.

Exclusion (Deductions from Taxable Value)

  • Discounts are allowed to be excluded if discount is recorded in invoice.
  • Discounts provided after the supply is also allowed to be excluded  provided two conditions are fulfilled, namely –
    1. Discount is  as per terms of a pre-supply agreement and such discount is linked to relevant invoices and.
    2. Input tax credit attributable to such discounts is reversed by the recipient Goods or Service.

Lets take a example: Mr. A buys some Goods from XYZ ltd. and details of expenses charged by XYZ form Mr. A is as follow:

Price of Goods Supplied – 10,000

Professional Service in respect of Goods Supplied – 2000

Local taxes and Charges (Other than GST) – 500

Trade Discount given by XYZ ltd. is 10% of Purchase Price of Goods.

What will be the taxable value, GST (rate- 18%) and invoice value.

Particulars Amount
Value of Goods Supplied 10,000
Inclusions:
Fees 2,000
Local Taxes & Charges 500 2,500
Exclusions:
Trade Discount 10,000*10% 1,000
Taxable Value of Goods 13,500
GST
13,500*18% 2,430
Invoice Value
  15,930

Example 2 : Suppose in example 1 a cash discount of 5% of Price of goods is also given by Supplier and this discount is as per the terms of Pre-Supply Agreement.

The Taxable will be

Old Taxable Value 13,500
Less: Discount 10,000*5% 500
New Taxable Value 13,000
GST 13,000*18% 2340
Invoice Value 15,340

Example 3: Suppose in Previous example cash discount of 5% is not per the terms of Pre-Supply Agreement.

In Such Case Cash Discount will not allowed to be deducted from the Value of Goods and Taxable Value, GST and Invoice will as per 1st Example i.e. Taxable Value – 13500, GST – 2430 and Invoice Value- 15,930.

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