In simple terms, the value of a taxable supply is the price actually paid or payable by the buyer to the seller for the goods or services. However, it’s not just the sticker price or invoice amount. The GST law under Section 15 of the CGST Act, 2017 provides a detailed framework to determine this value, including what components must be added to or excluded from the transaction value.
Understanding the correct value of supply is critical because:
1. It directly affects the amount of GST to be charged and paid.
2. Incorrect valuation can lead to penalties, interest, and compliance issues.
3. It ensures uniformity and transparency in tax practices across industries.✅ What is the Value of Supply?
The value of supply is the transaction value – i.e., the price paid or payable for the supply of goods or services.
This applies only if:
🔷 The supplier and recipient are not related (i.e., not family, group companies, or control-related parties).
🔷The price is the only consideration (no other benefits or exchanges involved).✅ What is Included in the Value of Supply?
Even if not directly mentioned in the invoice, certain elements must be included in the value:🔹 (a)Other Taxes and Duties
Include all other taxes, cesses, duties, and fees under any other laws (like Excise, Customs, Entry Tax), except:
CGST
SGST/UTGST
IGST
GST Compensation Cess
🔹 (b) Payments made by the buyer on behalf of the supplier
If the supplier is supposed to pay for something (like installation), but the recipient pays it instead, and it’s not part of the invoice — then add it to the value.
🔹 (c) Incidental Expenses
Include any extra charges collected by the supplier before or at the time of supply, such as:
Packing charges
Loading/unloading charges
Commission
Handling charges
🔹 (d) Interest, Late Fee, or Penalty
If the customer pays late, and the supplier charges extra for the delay — this interest or penalty is added to the value of supply.
🔹 (e) Price-linked Subsidies
Include subsidies that are directly linked to the price of goods/services, except subsidies given by:
Central Government
State Government
Government subsidies → Not included in value.
✅ What is NOT Included in the Value?
You can exclude discounts in two conditions:
🔸 (a) Discount Before or at Time of Supply
If discount is clearly shown on the invoice → It’s excluded from value.
🔸 (b) Discount After Supply
Allowed only when:
1. Discount was part of a pre-agreed deal (signed before sale),
2. Discount is linked to specific invoices, and
3. Buyer reverses ITC related to the discount.
If all 3 conditions are met → Discount can be excluded from taxable value.
✅ When Transaction Value Cannot Be Used
Sometimes, you can’t use the normal price (transaction value) – for example:
When parties are related
✅ Who are “Related Persons”?
You can’t use transaction value if supplier and buyer are related. As per GST law, related persons include:
Understanding the correct value of supply is critical because:
1. It directly affects the amount of GST to be charged and paid.
2. Incorrect valuation can lead to penalties, interest, and compliance issues.
3. It ensures uniformity and transparency in tax practices across industries.✅ What is the Value of Supply?
The value of supply is the transaction value – i.e., the price paid or payable for the supply of goods or services.
This applies only if:
🔷 The supplier and recipient are not related (i.e., not family, group companies, or control-related parties).
🔷The price is the only consideration (no other benefits or exchanges involved).✅ What is Included in the Value of Supply?
Even if not directly mentioned in the invoice, certain elements must be included in the value:🔹 (a) Other Taxes and Duties
Include all other taxes, cesses, duties, and fees under any other laws (like Excise, Customs, Entry Tax), except:
CGST
SGST/UTGST
IGST
GST Compensation Cess
🔹 (b) Payments made by the buyer on behalf of the supplier
If the supplier is supposed to pay for something (like installation), but the recipient pays it instead, and it’s not part of the invoice — then add it to the value.
🔹 (c) Incidental Expenses
Include any extra charges collected by the supplier before or at the time of supply, such as:
Packing charges
Loading/unloading charges
Commission
Handling charges
🔹 (d) Interest, Late Fee, or Penalty
If the customer pays late, and the supplier charges extra for the delay — this interest or penalty is added to the value of supply.
🔹 (e) Price-linked Subsidies
Include subsidies that are directly linked to the price of goods/services, except subsidies given by:
Central Government
State Government
Government subsidies → Not included in value.
✅ What is NOT Included in the Value?
You can exclude discounts in two conditions:
🔸 (a) Discount Before or at Time of Supply
If discount is clearly shown on the invoice → It’s excluded from value.
🔸 (b) Discount After Supply
Allowed only when:
1. Discount was part of a pre-agreed deal (signed before sale),
2. Discount is linked to specific invoices, and
3. Buyer reverses ITC related to the discount.
If all 3 conditions are met → Discount can be excluded from taxable value.
✅ When Transaction Value Cannot Be Used
Sometimes, you can’t use the normal price (transaction value) – for example:
When parties are related
✅ Who are “Related Persons”?
You can’t use transaction value if supplier and buyer are related. As per GST law, related persons include: