This article delves into Chapter 4 of the Central Goods and Services Tax (CGST) Rules, which outlines methods for determining the value of supply. This information is based on the official CGST rules document from the Central Board of Indirect Taxes and Customs (CBIC) [http://www.cbec.gov.in/resources//htdocs-cbec/gst/cgst-rules-01july2017%20.pdf].

Assessing Supply Value When Consideration is Not Fully Monetary

When goods or services are supplied without the entire consideration being monetary, their value is determined as follows:

• The open market value of the supply.
• If the open market value is not available, the value will be the total of the monetary consideration plus a monetary equivalent of the non-monetary consideration, provided this amount is known at the time of supply.
• If the value cannot be determined by the above clauses, it will be the value of a supply of similar goods or services of like kind and quality.
• If still undeterminable, the value will be the total of monetary consideration and the monetary equivalent of non-monetary consideration, as established by applying rule 30 or rule 31 in that order.

Example Scenarios

• Scenario 1: A new phone is exchanged for an old one, costing twenty thousand rupees. If the new phone's price without exchange is twenty-four thousand rupees, then its open market value is twenty-four thousand rupees.
• Scenario 2: A laptop is supplied for forty thousand rupees, alongside a printer manufactured by the recipient as barter. The printer's value at the time of supply is four thousand rupees, but the laptop's open market value is unknown. In this case, the laptop's supply value is forty-four thousand rupees.

Supply Value Between Distinct or Related Entities (Non-Agent)

For supplies of goods or services between distinct persons (as defined in subsections (4) and (5) of section 25) or between related parties, not involving an agent, the value is determined by these criteria:

• The open market value of the supply.
• If the open market value is not available, the value of similar goods or services of like kind and quality.
• If still undeterminable, the value is established by applying rule 30 or rule 31 in that order.

However, if the recipient intends to further supply the goods as they are, the supplier may choose for the value to be ninety percent of the price charged by the recipient to an unrelated customer for similar goods.

Furthermore, if the recipient is eligible for full input tax credit, the declared invoice value is considered the open market value.

Supply Value for Goods Provided Through an Agent

The value of goods supplied between a principal and their agent is determined as follows:

• The open market value of the goods. Alternatively, the supplier can opt for ninety percent of the price at which the recipient (agent) sells similar goods to their unrelated customer, especially when the goods are meant for further supply by the agent.

Example: Agent Supply

• A principal supplies groundnuts to an agent, who then sells similar groundnuts for five thousand rupees per quintal. Another independent supplier sells comparable groundnuts to the agent for four thousand five hundred and fifty rupees per quintal. The principal's supply value would be four thousand five hundred and fifty rupees per quintal, or if the option is exercised, ninety percent of five thousand rupees, which is four thousand five hundred rupees per quintal.
• If the value cannot be determined by clause (a), it will be established by applying rule 30 or rule 31 in that order.

Cost-Based Determination of Supply Value

If the value of a supply of goods or services cannot be determined by any of the preceding rules in this Chapter, the value will be set at one hundred and ten percent of the cost of production, manufacture, acquisition of goods, or the cost of providing the services.

Residual Method for Supply Value Determination

When the value of supply of goods or services cannot be ascertained using rules 27 through 30, it must be determined by reasonable methods consistent with the principles and general provisions of section 15 and this Chapter. For services, the supplier has the option to use this rule, bypassing rule 30.

Specific Valuation Rules for Certain Supplies

Notwithstanding other provisions in this Chapter, suppliers can opt to determine the value for specific supplies as detailed below.

Foreign Currency Exchange

The value of services related to buying or selling foreign currency, including money changing, is calculated by the service provider as follows:

• For currency exchanged from or to Indian Rupees, the value equals the difference between the buying or selling rate and the Reserve Bank of India (RBI) reference rate for that currency, multiplied by the total units of currency. If the RBI reference rate is unavailable, the value is one percent of the gross Indian Rupee amount provided or received. If neither currency exchanged is Indian Rupees, the value is one percent of the lesser of the two amounts that would have been received by converting either currency into Indian Rupees at the RBI reference rate on that day. A supplier can choose to use option (b) for a financial year, and this choice cannot be changed during that year.
• Alternatively, the supplier can choose to value foreign currency exchange services as:
  • One percent of the gross amount exchanged for amounts up to one lakh rupees, with a minimum of two hundred and fifty rupees.
  • One thousand rupees plus half a percent of the gross amount exchanged for amounts exceeding one lakh rupees up to ten lakh rupees.
  • Five thousand five hundred rupees plus one-tenth of a percent of the gross amount exchanged for amounts exceeding ten lakh rupees, subject to a maximum of sixty thousand rupees.

Air Travel Agent Services

The value of services provided by an air travel agent for booking air tickets is deemed to be five percent of the basic fare for domestic bookings and ten percent of the basic fare for international bookings. The