Tax in India

Subsidies directly linked to the price of the supply are to be included in the transaction value, where such subsidies are not provided by the Central/ State Governments. Where it can be established that the price of the supply is not directly linked to the subsidy given on capital goods, the same is not required to be included.

(ICAI FAQ PUBLICATIONS 06-09-2017 VALUE OF TAXABLE SUPPLY: FAQ NO. 58)

Interest, Penalty or Late fee charged from the customer would also be liable to GST. However, the law provides that the GST liability on such values can be paid only on receiving such additional amounts.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY: FAQ NO.56)

The laws assume that the relationship between the contracting parties prima facie influence the price at which the transaction is being carried out. Since the relationship did not exist on the date the prices were finalized (i.e., entering into the contract), the transaction value should be accepted in case of supplies effected prior to the forming of such relationship. However, for supplies effected after the two persons become ‘related persons’ for the purpose of the GST law, the transaction value cannot be accepted and reference must be made to the CGST Rules.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY : FAQ NO.55)

Quantity Discounts are allowed based on the volume / value of purchases made by the customer for a particular period. The discount is allowed at the end of a particular period based on the pre-agreed rates entered into between the supplier and the recipient. Such discounts will be eligible for exclusions by way of credit notes, only where the supplier is in a position to link the discount to each and every invoice, and the recipient reverses the credit to the extent of such discount.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY: FAQ NO. 54)

Yes, the following two types of discounts would be excluded from transaction value:
 Discount at the time of Sale – Allowed as a deduction, provided if the discount is recorded on the face of invoice.                                                                            Post-supply Discount – If such discount is based on the arrangement entered into before or at the time of supply, AND where the same can be linked to relevant invoices, then the same is allowed as a discount on the condition that the recipient reverses the input tax credit related to such discount availed earlier.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY: FAQ NO. 53)

All the expenses incurred by the supplier, in relation to the supply, are required to be included in the transaction value to the extent they are charged for. Even if the contract is for delivery of goods ex-factory, and the supplier incurs the cost of transportation on behalf of the recipient for delivery of goods to the recipient, the cost should be included in the transaction value, if the supplier charges the recipient for the same. However, if the contract price is for delivery of goods at the location of the recipient, then the transportation charges incurred by the supplier would not be required to be added to the transaction value, as the cost is contained in the said value.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY: FAQ NO.52)

The law provides that expenses incurred by the recipient in relation to supplies made by supplier of goods / services is to be included in the transaction value, only where such expenses were to be borne by the supplier. However, in the instant case, it cannot be said that the suppliers are liable to incur the cost of booking of flight tickets or that the cost was incurred by the recipient on behalf of the supplier. Hence, the value of flight tickets booked are not required to be included by the Chartered Accountants in their invoice, for computation of transaction value of audit service.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY: FAQ NO. 51)

Yes. Section 15 of the CGST Act, 2017 provides for inclusions to the transaction value (on which GST will be payable). The below are broadly, the inclusions prescribed:
(a) any taxes, duties, cess, fees and charges levied under any law for the time being in force other than the CGST Act, 2017, the SGST Act, 2017, UTGST Act, 2017 and the Goods and Services Tax (Compensation to States) Act, 2017, if charged separately by the supplier;
(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient, but not included in the price;
(c) incidental expenses, including commission and packing, charged by the supplier to the recipient, and any amount charged for anything done by the supplier in respect of the supply until delivery of goods or supply of services;
(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and
(e) subsidies directly linked to the price excluding subsidies provided by the Government.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY : FAQ NO.50)

Under the GST law, consideration can be in “money or otherwise”, and also includes the monetary value of an act or forbearance, in relation to a supply. Consideration may also flow from any person other than the recipient. In cases, where the money received in respect of the supply is not the sole consideration, the “price is not the sole consideration”. E.g. Buyer of capital goods discharges the loan of seller, goods purchased on exchange offer, etc.

(ICAI FAQ PUBLICATION 06-09-2017 VALUE OF TAXABLE SUPPLY : FAQ NO. 49)