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© Indirect Taxes Committee, ICAI2Time of Supply

TIME OF SUPPLY OF GOODS – SEC 12(2)© Indirect Taxes Committee, ICAI3As per Section 12(2) ofCGST ACT, time ofsupply of goods shall beearlier of invoice/payment, i.e., –Actual date of issue of invoice by the supplierDue date for issue of invoice by the supplier [Section 31(1)*]:- Non-Continuous Supply involves movement: Time of removal of goodsfor supply [31(1)(a)]- Non-Continuous Supply - Other cases: Delivery of goods/ makingavailable to the recipient or [31(1)(b)]- Continuous Supply: Date of issue of statement of account/receipt ofpayment [31(4)]- Sale on approval basis: Earlier of time at which it becomes known thatthe supply has taken place OR 6 months from date of removal [31(7)]Date of receipt of payment (date on which payment is entered in the books of Accounts of supplier or Date on which payment is credited to the supplier’s bank a/c whichever is earlier- Explanation 2 to Section 12(2)*Where payment is received in advance, the Supplier shall issue a receipt voucher, and NOT a tax invoice

TIME OF SUPPLY OF GOODS – SEC 12(2)• Excess payment of upto Rs. 1000/- is received in respect of any invoice➢ Time of supply shall at option of the supplier is date of issue of invoice in respect of such excess amount. (Proviso to Sec 12(2)) • No tax on advance received against the supply of goodsAs per Notification No. 40/2017- CT dated 13-10-2017, suppliers of goods havingaggregate turnover of upto Rs 1.50 crores in the last year or current year havebeen exempted to pay tax upon receipt of advance (w.e.f 13-10-2017) as the timeof supply in such cases would be the date of invoice or due date of issue ofinvoice in light of Clause (a) of Section 12(2). Subsequently this exemption hasbeen extended w.e.f. 15-11-2017 to all tax payers vide Notification No 66/2017-CT dated 15-11-2107.This benefit is not available to person covered under Composition Scheme.© Indirect Taxes Committee, ICAI 4

TIME OF SUPPLY OF GOODS – SEC 12(2)Period Taxability of consideration received in advance Aggregate turnover less than Rs 1.50 crores Aggregate turnover more than Rs 1.50 crores 01.07.2017 to 12.10.2017 Taxable Taxable 13.10.2017 to 14.11.2017 Not taxable Taxable 15.11.2017 and onwards Not taxable Not taxable © Indirect Taxes Committee, ICAI 5In summary, the taxability of the consideration received in advance in respect of goods for non-composition dealers would be as follows:

TIME OF SUPPLY OF GOODS – SEC 12(2) ILLUSTRATIONS© Indirect Taxes Committee, ICAI6Non continuous supply of goods Section 12(2) r/w Section 31(1) Invoice dateDue date of issue of invoicePayment entry in supplier's booksCredit in bank accountTime of supply1Invoice raised before removal10-March-1820-March-1826-March-1830-March-1810-March-182Advance received30-March-1820-March-1810-Feb-18 25-Feb-1820-March-183Advance received (Composition Dealer) 10-Feb-18 20-Feb-18 25-Jan-18 28-Jan-18 25-Jan-18

TIME OF SUPPLY OF GOODS – SEC 12(2) ILLUSTRATIONS© Indirect Taxes Committee, ICAI7Non continuous supply of goodsSection 12(2) r/w Section 31(1)Invoice/ document dateDue date of issue of invoiceReceipt of paymentTime of supply4Delayed issue of invoice26-March-1820-March-1828-March-1820-March-185Inter-State stock transfer20-March-1820-March-18-20-March-186Advance received, invoice for full amount issued on same day (40% advance, 60% post supply payment)10-March-1812-March-1810-March-18 (40%)10- March-1820-March-18 (60%)10-March-18

TIME OF SUPPLY OF GOODS – SEC 12(2) ILLUSTRATIONS© Indirect Taxes Committee, ICAI8Continuous supply of goodsSection 12(2) r/w Section 31(4)Invoice dateSoA/ payments due dateReceipt of paymentTime of supply7Contract provides for successive statements of account/ successive payments01-Mar-1805-Mar-18 03-Mar-18 01-Mar-18811-April-1805-April-18 13-April-18 05-April-18908-April-1805-April-18 01-April-18 01-April-18

TIME OF SUPPLY OF GOODS – SEC 12(2) ILLUSTRATIONS© Indirect Taxes Committee, ICAI9Sale on approval basisSection 12(2) r/w Section 31(7)Removal of goodsIssue of invoiceAccepted by recipientReceipt of paymentTime of supply10Acceptance communicated within 6 months of removal01-Feb-18 25-Feb-18 15-Feb-18 25-Feb-18 15-Feb-1811Acceptance not communicated within 6 months of removal01-Oct-17 15-May-18 15-May-18 18-April-1801-Apr-18(end of 6 months from date of removal of goods)

TIME OF SUPPLY OF SERVICES – SEC 13(2)© Indirect Taxes Committee, ICAI10If invoice not issued within 30 days(45 days in case of Banking, Insurance,Financial Institution or NBFC company)-Clause (b)If both the above clauses do not apply*Where payment is received in advance, the Supplier shall issue a receipt voucher, and NOT a tax invoiceDate on which recipient showsthe receipt of services in hisbooks of accountsDate of provision (completion)of service or receipt of payment,whichever is earlierIf invoice issued within prescribed time u/s31(2) - 30 days (45 days in case of Banking,Insurance, Financial Institution or NBFCcompany)- Clause (a)Date of issue of Invoice orreceipt of payment(Earlier ofentry in books or credit in bankaccount), whichever is earlier*Where payment of Rs. 1000/- is received in excess, then time of supply for goods or services at the option of supplier is date of issue of invoice (Proviso to section 13(2)).

TIME OF SUPPLY OF SERVICES – SEC 13(2) ILLUSTRATIONS© Indirect Taxes Committee, ICAI11Section 13(2)Invoice dateInvoice due datePayment entry in supplier's booksCredit in bank accountTime of supply1Invoice raised before completion of service10-March-1820-March-1826-March-1830-March-1810-March-182Advance received30-April-1820-April-1810-April-1830-April-1810-April-18

TIME OF SUPPLY OF SERVICES – SEC 13(2) ILLUSTRATIONS© Indirect Taxes Committee, ICAI12Based on due date for invoicingSection 13(2) r/w Section 31(2) r/w CGST rule 47Invoice dateCommencement of serviceCompletion of serviceReceipt of paymentTime of supply3Delayed issue of invoice26-March-1820-Jan-1816-Feb-1828-April-1816-Feb-184Advance received, invoice for full amount issued on same day (40% advance, 60% post supply payment)30-April-1830-March-183-April-1830-April-1830-April-1804-May-1830-April-18

TIME OF SUPPLY OF SERVICES – SEC 13(2) ILLUSTRATIONS© Indirect Taxes Committee, ICAI13Continuous supply of servicesSection 13(2) r/w Section 31(5)Invoice dateDate as per contractReceipt of paymentTime of supply5Section 31(5)(a)Contract provides for payments monthly on the 10thof succeeding month02-Feb-18 10-Feb-18 15-Feb-18 02-Feb-1817-Feb-18 10-Feb-18 15-Feb-18 10-Feb-1810-Jan-18 10-Jan-18 06-Jan-18 06-Jan-1812-Feb-18 10-Feb-18 25-Feb-18 10-Feb-18

TIME OF SUPPLY OF GOODS / SERVICES -REVERSE CHARGE – SEC 12(3) / 13(3)© Indirect Taxes Committee, ICAI14Date of receipt of Goods (applicable only forgoods)Date on which payment is entered in thebooks of recipient or debited to therecipient’s bank a/c (whichever is earlier)31stday (in case of goods) / 61stday (in case of services)from the date of issue of invoice by supplierNote: This factor is not relevant in case of import ofservices from an associated enterprise outside IndiaWhere it is not possible to determine time ofsupply in the 3 other cases: Date of entry in thebooks of account of the recipientNote: This factor is relevant in case of import ofservices from an associated enterprise outside IndiaWhere tax liable to be paid on reverse charge basis,the time of supply of goods/services shall beearliest ofIn case of import of services from an associated enterprises the time of supply is the date of entry in thebooks of account of recipient of supply OR date of payment, whichever is earlier. (2nd proviso to Section13(3) of CGST Act).

TIME OF SUPPLY OF GOODS / SERVICES -REVERSE CHARGE – SEC 12(3) / 13(3)© Indirect Taxes Committee, ICAI15Reverse chargeSection 12(3)Date of invoice issued by supplierRemoval of goodsReceipt of goodsPayment by recipientTime of supply1General31-Oct-17 31-Oct-17 20-Nov-17 30-Nov-17 20-Nov-172Advance paid31-Oct-17 31-Oct-17 20-Nov-17 05-Nov-17 05-Nov-173No payment made for the supply31-Oct-17 30-Dec-17 05-Jan-18 - 30-Nov-17

TIME OF SUPPLY OF GOODS / SERVICES -REVERSE CHARGE – SEC 12(3) / 13(3)© Indirect Taxes Committee, ICAI16Reverse chargeSection 13(3)Date of invoice issued by supplierDate of completion of servicePayment by recipientEntry of receipt of services in recipient's booksTime of supply4General31-Oct-17 31-Aug-17 20-Nov-17 30-Nov-17 20-Nov-175Advance paid31-Oct-17 31-Oct-17 05-Nov-17 31-Oct-17 05-Nov-176Delay in payment (Max. 60 days from date of invoice)31-Oct-17 31-Oct-17 10-Feb-18 31-Oct-1731-Dec-17(61st day from date of invoice)7Service received from associated enterprise located outside India31-Oct-17 30-Nov-17 05-Apr-18 31-Mar-18 31-Mar-188Service by unregistered person, no payment made-30-Nov-17-05-Dec-1705-Dec-17

TIME OF SUPPLY OF VOUCHERS – SEC 12(4)/13(4)© Indirect Taxes Committee, ICAI17Time of supply in case of supply ofvoucher–Date of issue – If supply isidentifiable at the point ofissue of voucherDate of redemption ofvoucher – Other casesNote: Voucher – can be for goods or services

TIME OF SUPPLY OF VOUCHERS – SEC 12(4)/13(4)© Indirect Taxes Committee, ICAI18Issue of vouchersSection 13(4) [or Section 12(4)]First service/ delivery of goodsIssue of voucherRedemption of voucherLast date for acceptance of voucherTime of supply1Voucher issued to a recipient after supply of a service [or specific goods], for the same service - valid for 1 year01-Nov-17 01-Nov-17 14-Dec-17 30-Oct-18 01-Nov-172Voucher issued to a recipient of machinery along at the time of delivery, for availing repair services [or specific goods] worth Rs. 5,000 - valid for 1 year01-Nov-17 01-Nov-17 14-Dec-17 30-Oct-18 01-Nov-173Voucher issued to a recipient after supply of a service, for any other services or goods across India, - valid for 1 year01-Nov-17 01-Nov-17 14-Dec-17 30-Oct-18 14-Dec-174Gift voucher for Rs. 1,500 for services [or goods]-valid for 6 months- 01-Nov-17 25-Dec-17 31-Mar-18 01-Nov-17

RESIDUAL PROVISION – SEC 12(5) / 13(5)© Indirect Taxes Committee, ICAI19Where it is not possible to determinethe time of supply under any of thecircumstances discussed, it shall bedetermined as:Due date for filing of suchreturn – If periodical returnhas to be filedDate on which the Tax ispaid – Other cases

© Indirect Taxes Committee, ICAI 20Time of supplyfor valueaddition byway ofInterest,Late Fees,PenaltyFor Delayed payment of Consideration shall beDate on whichthe supplierreceives suchaddition invalueTime of Supply of Goods / Services - Value Addition – Sec 12(6) / 13(6)As per Section 15(2)(d) of CG ST Act the value of supply shall include interest or late fee or penalty fordelayed payment of any consideration for any supply.

CHANGE IN RATE OF TAX IN RESPECT OF SUPPLY OF GOODS OR SERVICES – SEC 14© Indirect Taxes Committee, ICAI21Date of supply of goods or servicesDate of invoiceDate of receipt of paymentTime of supply Rate of tax(1) (2) (3) (4) (5)BeforeAfter After Earlier of (2) and (3) NewBeforeBefore After (2) OldBeforeAfter Before (3) OldAfterBefore After (3) NewAfterBefore Before Earlier of (2) and (3) OldAfterAfter Before (2) New

CHANGE IN RATE OF TAX IN RESPECT OF SUPPLY OF GOODS OR SERVICES – SEC 14-ILLUSTRATION© Indirect Taxes Committee, ICAI22Date of supply of goods or servicesDate of invoiceDate of receipt of paymentTime of supply Rate of tax10.09.201705.10.2017 08.10.2017 05.10.2017 (Earlier of (ii) and (iii))New Rate10.09.2017 25.09.2017 08.10.2017 25.09.2017 (date of invoice)Old rate10.09.2017 05.10.2017 27.09.2017 27.09.2017 (date of receipt of payment)Old rate06.10.2017 25.09.2017 08.10.2017 08.10.2017 (date of receipt of payment)New rate06.10.2017 25.09.2017 27.09.201725.09.2017 (Earlier of (ii) and (iii))Old rate06.10.2017 05.10.2017 27.09.2017 05.10.2017 (date of invoice)New rateSuppose there is change in rate of tax from 01/10/2017. The TOS and rate of tax applicable is asunder in various situations.

© Indirect Taxes Committee, ICAI23Value of Supply

VALUE OF TAXABLE SUPPLY – SEC 15© Indirect Taxes Committee, ICAI24Value of Taxable SupplyValue of supply of goods or services or both shall be the ‘Transaction Value’, where• Supplier and recipient of supply are unrelated• Price is actually paid / payable – AND price is the sole consideration for the supplyExplanation to Section 15 of the CGST Act deems the persons below to be “related persons”:• Officers / Directors of one another’s business• Partners in business• Employer – employee• A person directly / indirectly owns / controls / holds 25% of shares of both the persons• One directly / indirectly controls the other• Both are directly / indirectly controlled by a third person• Together, they directly / indirectly control a third person• Members of the same family• Sole agent / distributor / concessionaire of the other

TRANSACTION VALUE: INCLUSIONS AND EXCLUSIONS© Indirect Taxes Committee, ICAI25Transaction Value INCLUDES:▪ Amounts charged separately by supplier to recipient inrespect of any taxes, duties, cesses, fees and charges leviedunder any law, other than taxes paid under GST regime;▪ Amount incurred by Recipient which is liable to be paid bythe Supplier and not included in the price;▪ Charges by Supplier to Recipient being:• Incidental expenses (e.g.: packing, commission)• Charges for anything done by the Supplier at the timeor before the supply, in respect thereof• Interest/ late fee/ penalty for delayed payment ofconsideration• Subsidies directly linked to price – for supplierreceiving the subsidy (excluding Central and State Govtsubsidies; i.e., Government subsidies will not beincluded in transaction value)Transaction Value EXCLUDESdiscount:▪ Before / at the time of supply• Single condition: Such discountis duly recorded in the invoice▪ After the supply: Cumulativeconditions:• Agreement establishing discountentered into before / at the timeof supply• Discount specifically linked torelevant invoices• ITC reversed by the recipient tothe extent of discount

TRANSACTION VALUE: RECOURSE TO RULESA. Where value cannot be determined u/s 15(1), i.e., when:1. Price is not the sole consideration2. Supplier-recipient are related persons: Recourse to Rules even if the Supplier-Recipientrelationship:• Did not influence the price;• Precedes agreement to the supply;• Has no bearing on pricing;• Has no bearing on Agreement to the Supply;• Has no relevance to the Supply;• Was to meet with different criteria or purpose;(Rules will apply both ways – supplier to recipient and recipient tosupplier)B. In case of notified supplies© Indirect Taxes Committee, ICAI26

© Indirect Taxes Committee, ICAI27CGST Rules, 2017(Rule 27 to 35)

RULE 27 OF CGST RULESValue of supply of goo ds or services whereconsideration is not wholly in money• The value of supply shall be-a) The open market value of such supplya) If open market value not available, be the sum total ofconsideration in money and such further amount in money as isequivalent to consideration not in money if such amount is notknown at the time of supply© Indirect Taxes Committee, ICAI28

RULE 27 OF CGST RULES CONTINUEDc) If value is not determinable under (a) or (b), the value of supply ofgoods/ services of like kind and qualityd) If value not determinable under (a), (b) or (c), be the sum total ofconsideration in money and such further amount in money that isequivalent to consideration not in money as determined byapplication of rule 30 or 31 in that order.© Indirect Taxes Committee, ICAI29

RULE 27 OF CGST RULES CONTINUED• Illustration:(1) Where a new ph one is supplied for Rs. 20,000/- along with t heexchange of an old phone and if the price of the new phonewithout exchange is Rs. 24,000/- , the open market value of thenew phone is Rs. 24,000/-.(2) Where a laptop is s upplied for Rs. 40,000/- along with the bart erof a printer that is manufactured by the recipient and the value ofthe printer known at the time of supply is Rs. 4,000/- but the openmarket value of the laptop is not known, the value of the supply ofthe laptop is Rs. 44,000/-.© Indirect Taxes Committee, ICAI30

RULE 28: VALUE OF SUPPLY OF GOODS OR SERVICES OR BOTH BETWEENDISTINCT OR RELATED PERSONS, OTHER THAN THROUGH AN AGENT© Indirect Taxes Committee, ICAI31(a) The open market value of such supplyValue of supply of goods orservices of like kind and qualityProvided th at where goods are intended for further supply as such by th erecipient, the value shall, at the optio n of the supplier, be an amoun tequivalent to 90% of the price charged for the supply of goods of like kindand quality by the recipient to his customer not being a related personValue as determined byapplication of Rule 30 or Rule31, in that orderWhere the recipient is eligible for full input tax credit, the value declared inthe invoice shall be deemed to be the open market value of goods or services

RULE 29: VALUE OF SUPPLY OF GOODS MADE OR RECEIVED THROUGH AN AGENT a) open market value, or• at the option of the supplier, be 90% of the price charged for thesupply of goods of like kind and quality by the recipient (agent)to his customer not being a related person,• where the goods are intended for further supply by the saidrecipient (agent)b) where the value of a supply is not determinable under clause (a),• the same shall be determined by application of rule 30 or rule 31 inthat order.© Indirect Taxes Committee, ICAI32

RULE 29: VALUE OF SUPPLY OF GOODS MADE OR RECEIVED THROUGH AN AGENT • Illustration:• A principal supplies groundnut to his agent and the agent issupplying groundnuts of like kind and quality in subsequentsupplies at a price of five thousand rupees per quintal on the dayof the supply. Another independent supplier is supplyinggroundnuts of like kind and quality to the said agent at t he price offour t housand five hundred and fifty rupees per quintal. The valueof the supply ma de by the principal s hall be four t housand fivehundred and fifty rupees per quintal or where he exercises theoption, the value shall be 90 per cent. of five thousand rupees i.e.,four thousand five hundred rupees per quintal.© Indirect Taxes Committee, ICAI33

RULE 30: VALUE OF SUPPLY OF GOODS OR SERVICES OR BOTH BASED ON COST• Where value is not determinable by any of the preceding rules,• the value shall be 110% of the:➢ cost of production or manufacture or➢ cost of acquisition of such goods or➢ cost of provision of such services.© Indirect Taxes Committee, ICAI34

RULE 31: RESIDUAL METHOD• Where value cannot be determined under Rules 27 to 30, the sameshall be determined using reasonable means consistent with theprinciples and general provisions of Sec 15 and these Rules.• Further, in case of supply of services, the supplier may opt for thisrule, disregarding rule 30.© Indirect Taxes Committee, ICAI35

RULE 31A : VALUE OF SUPPLY IN CASE OF LOTTERY, BETTING, GAMBLING AND HORSE RACING• Value of supply of lottery run by State Governments shall be deemed to be higher of :-➢100/112 of the face value of ticket➢Price as notified in the Official Gazette by the organising State• Value of supply of lottery authorised by State Governments shall be deemed to be higher of :-➢100/128 of the face value of ticket➢Price as notified in the Official Gazette by the organising State© Indirect Taxes Committee, ICAI 36

RULE 31A : VALUE OF SUPPLY IN CASE OF LOTTERY, BETTING, GAMBLING AND HORSE RACING• Explanation:-a) “lottery run by State Governments” means a lottery not allowed to be sold inany State other than the organizing Stateb) “lottery authorised by State Governments” means a lottery which isauthorised to be sold in State(s) other than the organising State also.c) “Organising State” has the same meaning as assigned to it in clause (f) ofsub-rule (1) of rule 2 of the Lotteries (Regulation) Rules, 2010• Value of supply of actionable claim in the form of chance to win in betting,gambling or horse racing in a race club shall be:➢ 100% of the face value of the bet or➢the amount paid into the totalisator© Indirect Taxes Committee, ICAI 37

RULE 32: DETERMINATION OF VALUE IN RESPECT OF CERTAIN SUPPLIESRule 32(2): Purchase or sale of forex including money changingOption-1• When exchanged from or/ to INR:➢difference of buying rate/ selling rate and RBI reference rate X total units ofcurrency(If RBI reference rate is not available, value shall be 1% of gross amount ofINR received or provided)• If neither of two currencies exchanged in INR, the value shall be equal to:➢1% of the lesser of the two amounts➢received by converting any of the two currencies into INR➢on that day at the reference rate provided by RBI.© Indirect Taxes Committee, ICAI38

RULE 32: DETERMINATION OF VALUE IN RESPECT OF CERTAIN SUPPLIES© Indirect Taxes Committee, ICAI39OPTION-2Amount of currencyexchanged exceedingRs.1 lakh and up toRs.10 lakhsRs. 1,000/- + 0.5% of the grossamount of currency exchangedabove Rs. 100,000/-Amount of currencyexchanged up to Rs.1lakh1% of the gross amount ofcurrency exchanged or Rs. 250/-,whichever is higherAmount of currencyexchanged exceedingRs.10 lakhsRs. 5,500/- + 0.10% of the grossamount of currency exchangedabove Rs.10 lakhs or Rs. 60,000/-, whichever is lower

RULE 32: DETERMINATION OF VALUE IN RESPECT OF CERTAIN SUPPLIESRule 32(3) - Air Travel Agents:• Domestic bookings: 5% of Basic Fare• International bookings: 10% of Basic Fare• “Basic fare” means that part of the air fare on which commission is normallypaid to the air travel agent by the airline.© Indirect Taxes Committee, ICAI40

RULE 32: DETERMINATION OF VALUE IN RESPECT OF CERTAIN SUPPLIESRule 32(4)-Life Insurance Businessa) gross premium charged from a policy holder reduced by the amountallocated for investment, or savings on behalf of the policy holder, ifsuch amount is intimated to the policy holder at the time of supply ofservice;b) in case of single premium annuity policies other than (a) - 10% of singlepremium charged from the policy holder; orc) in all other cases, 25% of the premium charged from the policy holderin the first year and 12.5% of the premium charged from policy holderin subsequent years;• Not apply where the entire premium paid by the policy holder is onlytowards the risk cover in life insurance.© Indirect Taxes Committee, ICAI41

RULE 32: DETERMINATION OF VALUE IN RESPECT OF CERTAIN SUPPLIESRule 32(5)- Second Hand Goods• Supply of used goods as such or after such minor processing which doesnot change the nature of the goods and where no ITC has been availedon purchase of such goods,• the value of supply shall be:➢the difference between the selling price and purchase price and➢where the value of such supply is negative, it shall be ignored.© Indirect Taxes Committee, ICAI42

RULE 32: DETERMINATION OF VALUE IN RESPECT OF CERTAIN SUPPLIESRule 32(6)- Token / Coupon / Voucher / Stamp• The value of a token, or a voucher, or a coupon, or a stamp (other than postagestamp) which is redeemable against a supply shall be equal to:-➢money value of the goods or services or both redeemable against suchtoken, voucher, coupon, or stamp.Rule 32(7)- Distinct Persons• The value of taxable services provided by such class of service providers; asmay be notified by the Government between distinct persons, (Entry-2 ofSchedule I); other than those where ITC is not available under S.17(5); shall bedeemed to be NIL.© Indirect Taxes Committee, ICAI43

RULE 33: DEFINITION OF PURE AGENT• Agency supplies are different from ‘pure agent’ in relation to valuation• There is a payment made to third party by a payer• Payer is a supplier of goods or services or both to a beneficiary (client)• Underlying obligation to pay third party is of the beneficiary (client)• Payment by payer is to discharge beneficiary’s obligation toward thirdparty• Third party enjoys recourse to beneficiary in case of non-payment bypayer• For example, income-tax liability of a client is paid by the CA© Indirect Taxes Committee, ICAI44

RULE 33: VALUE OF SUPPLY OF SERVICES IN CASE OF PURE AGENT• The expenditure or costs incurred by the pure agent shall be excludedfrom the value of supply, if all the following conditions are satisfied,namely:(i) the supplier acts as a pure agent of the recipient of the supply,(ii) Receive supply in his capacity as pure agent of the recipient of supply;(iii)the recipient of supply is liable to make payment to the third party;(iv)the recipient of supply authorises the supplier to make payment on his behalf;(v) the recipient of supply knows that the services shall be provided by third party;(vi)separately indicated in the invoice of service;(vii)the supplier recovers only such amount as has been paid to third party; and(viii) services as pure agent are in addition to supply he provides on his own account.© Indirect Taxes Committee, ICAI45

ILLUSTRATION• Illustration.- Corporate service firm A is engaged to handle thelegal work pertaining to the incorporation of Company B. Otherthan its service fees, A also recovers from B, registration fee andapproval fee for the name of the company paid to the Registrar ofCompanies.• The fees charged by the Registrar of Companies for the registrationand approval of the name are compulsorily levied on B. A is merelyacting as a pure agent in the payment of those fees.• Therefore, A’s recovery of such expenses is a disbursement and notpart of the value of supply made by A to B.© Indirect Taxes Committee, ICAI46

RULE 34: RATE OF EXCHANGE OF CURRENCY, OTHER THAN INR,FOR DETERMINATION OF VALUE(1) The rate of exchange for determination of value of taxable goods shallbe:-the applicable rate of exchange as notified by the Board under section14 of the Customs Act, 1962 for the date of time of supply of such goods interms of section 12 of the Act.(2) The rate of exchange for determination of value of taxable servicesshall be:-the applicable rate of exchange determined as per the generally© Indirect Taxes Committee, ICAI47

RULE 35: VALUE OF SUPPLY INCLUSIVE OF INTEGRATED TAX, CENTRAL TAX, STATE TAX, UNION TERRITORY TAX• Where Value of Supply is inclusive of IGST/ CGST/ SGST/ UTGST then:Value inclusive of taxes X tax rate in % of IGSTor as the casemay be CGST, SGST or UTGST(100 + sum of tax rates, as applicable, in %)© Indirect Taxes Committee, ICAI48Tax Amount =

ILLUSTRATIONS• Mr. Mohan located in Manipal purchases 10,000 Hero ink pens worthRs.4,00,000 from Lekhana Wholesalers located in Bhopal. Mr.Mohan’s wife is an employee in Lekhana Wholesalers. The price ofeach Hero pen in the open market is Rs.52. The supplier additionallycharges Rs.5,000 for delivering the goods to the recipient’s place ofbusiness.• Ans. Mr. Mohan and Lekhana Wholesalers would not be treated asrelated persons merely because the spouse of the recipient is anemployee of the supplier, although such spouse and the supplierwould be treated as related persons. Therefore, the transactionvalue will be accepted as the value of the supply. The transactionvalue includes incidental expenses incurred by the supplier inrespect of the supply up to the time of delivery of goods to therecipient. This means, the transaction value will be: Rs.4,05,000 (i.e.,4,000,000 + 5,000).© Indirect Taxes Committee, ICAI49

ILLUSTRATIONS• Sriram Textiles is a registered person in Hyderabad. A particularvariety of clothing has been categorised as non-moving stock,costing Rs.5,00,000. None of the customers were willing to buythese clothes in spite of giving big discounts on them, for thereason that the design was too experimental. After months,Sriram Textiles was able to sell this stock on an online website toanother retailer located in Meghalaya for Rs.2,50,000, on thecondition that the retailer would put up a poster of SriramTextiles in all their retail outlets in the State.• Ans. The supplier and recipient are not related persons. Althougha condition is imposed on the recipient on effecting the sale,such a condition has no bearing on the contract price. This is acase of distress sale, and in such a case, it cannot be said thatthe supply in lacking ‘sole consideration’. Therefore, the price ofRs.2,50,000 will be accepted as value of supply.© Indirect Taxes Committee, ICAI50

ILLUSTRATIONS• Rajguru Industries stock transfers 1,00,000 units (costing Rs.10,00,000)requiring further processing before sale, from Bijapur in Karnataka toits Nagpur branch in Maharashtra. The Nagpur branch, apart fromprocessing units of its own, engages in processing of similar units byother persons who supply the same variety of goods, and thereaftersells these processed goods to wholesalers. There are no otherfactories in the neighbouring area which are engaged in the samebusiness as that of its Nagpur unit. Goods of the same kind andquality are supplied in lots of 1,00,000 units each time, by anothermanufacturer located in Nagpur. The price of such goods isRs.9,70,000.• Ans.: In case of transfer of goods between two registered units of thesame person (having the same PAN), the transaction will be treatedas a supply even if the transfer is made without consideration, assuch persons will be treated as ‘distinct persons’ under the GST law.The value of the supply would be the open market value of such© Indirect Taxes Committee, ICAI51

ILLUSTRATIONS• M/s. Monalisa Painters owned by Vasudev is popularly known for painting the interiors of banquet halls. M/s. Starry Night Painters (also owned by Vasudev) is engaged in painting machinery equipment. A factory contracts M/s. Monalisa Painters for painting its machinery to keep it from corrosion, for a fee of Rs.1,50,000. M/s. Monalisa Painters sub-contracts the work to M/s. Starry Night Painters for Rs.1,00,000, and ensures supervision of the work performed by them. Generally, M/s/ Starry Night Painters charges a fixed sum of Rs.1,000 per hour to its clients; it spends 120 hours on this project.• Ans.: Since M/s. Monalisa Painters and M/s. Starry Night Painters are controlled by Mr. Vasudev, the two businesses will be treated as related persons. Therefore, Rs.1,00,000 being the sub-contract price will not be accepted as transaction value. The value of the service would be the open market value being Rs. 1,20,000 (i.e., Rs. 1,000 per hour * 120 hours) *.© Indirect Taxes Committee, ICAI 52

ILLUSTRATIONS• Prestige Appliances Ltd. (Bangalore) has 10 agents locatedacross the State of Karnataka (except Bangalore). The stock ofchimneys is dispatched on Just-In-Time basis from PrestigeAppliances Ltd. to the locations of the agents, based on receiptof orders from various dealers, on a weekly basis. PrestigeAppliances Ltd. is also engaged in the wholesale supply ofchimneys in Bangalore. An agent places an order for dispatchof 30 chimneys on 22-Sep-2017. Prestige had sold 30 chimneys toa retailer in Bangalore on 18-Sep-2017 for Rs. 2,80,000. The agenteffects the sale of the 30 units to a dealer who would effect thesales on MRP basis (i.e., @ Rs.10,000/unit).• Ans.: The law deems these supplies between the principal andagent to be supplies for the purpose of GST. Therefore, thetransfer of goods by the principal (Prestige) to its agent for himto effect sales on behalf of the principal would be deemed tobe a supply although made without consideration. The value© Indirect Taxes Committee, ICAI 53

ILLUSTRATIONS• Mr. & Ms. Mehta purchase 10 gift vouchers for Rs. 500 each fromCrossword, and 5 vouchers from Four Fountains Spa costing Rs.1,000 each, and gives them as return gifts to children and theirparents for their son’s birthday party. The vouchers from FourFountains Spa had a special offer for couples – services for bothpersons at the price chargeable to one.• Ans. The value of the supply would be the money value ofthe goods redeemable against the voucher. Thus, in case ofvouchers from Crossword, the value would be Rs. 5,000 (i.e.,Rs.500 * 10) and the value of vouchers in case of Four FountainsSpa would be Rs. 10,000 (i.e., Rs. 1,000 * 2 * 5).© Indirect Taxes Committee, ICAI54

Thank You© Indirect Taxes Committee, ICAI55