Consideration versus Sole Consideration
Supply Includes
Sec 7 (1)(a) For consideration(for business)
sale, transfer, barter, exchange, licence, rental, lease or disposal etc
Sec 7 (1)(b) For consideration(for business or not)
Import of service
Schedule I Without consideration
•Permanent transfer/disposal of business assets where ITC availed
•Supply of goods or services between related persons, or distinct persons , when made in the course or furtherance of Business
•Supply between agent and principal•Import of service from a related person .
CA Vasant K. Bhat2
Consideration versus Sole Consideration Contd..
Supply Includes Schedule II Whether or not for consideration
• Transfer or disposal of business asset• Business assets put to private or other than
business purpose
Value of Taxable Supply:
Section 15 : Value of supply shall be the transaction value, where;(a) Supplier and recipient are not related, and (b) price is the sole consideration
Consideration is relevant to determine ‘supply’
Sole consideration is relevant to determine ‘value of taxable supply’
CA Vasant K. Bhat3
Consideration
Sec 2(31) of CGST Act: Consideration includes;
(a) any payment made or to be made, whether in money or otherwise…..whether by
the recipient or by any other person (excluding govt subsidies)
(b) the monetary value of any act or forbearance, … whether by the recipient or by any
other person (excluding govt subsidies)
CA Vasant K. Bhat4
Sole Consideration
CCE Mumbai v. Fiat India Pvt Ltd. [2012(283) ELT 161 (SC)];
“When word ‘consideration’ is qualified by word ‘sole’, it makes it stronger so as to
make it sufficient and valuable having regard to facts, circumstances and necessities of
case”
No additional benefit to the supplier other than the price, directly or indirectly
No flow back of additional consideration in cash or kind
Price is the only thing ultimately the supplier gets
CA Vasant K. Bhat5
Absence of Consideration Vs. presence of Non-Monetary Consideration
Absence of Consideration:
Supply - only in case of
Permanent transfer/disposal of business assets where ITC availed
Supply of goods or services between related persons, or distinct persons , when made in the course or furtherance of Business
Supply between agent and principal
Import of service from a related person
Transfer or disposal of business asset
Business assets put to private or other than business purpose
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Presence of Non-Monetary Consideration:
Consideration not wholly in money transaction value not applicable
Valuation shall be based on provisions of Valuation Rules.
Rule 1:
• Open market value
• Consideration in money + monetary value of non-monetary consideration, if suchamount is known
• Value of supply of goods or services or both of like kind and quality
• Consideration in money + monetary value of non-monetary consideration based on valuation rules
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Selling below cost - Is there any Non-Monetary Consideration?
Transaction value cannot be rejected just because price was less than the cost of
manufacture in the absence of allegation to the effect that price is not the sole
consideration, transaction was not at arm’s length etc.
[Collector v. Guru Nanak Refrigeration Corpn. - 1997 (96) E.L.T. A230 (S.C)]
CA Vasant K. Bhat8
Selling below cost - Is there any Non-Monetary Consideration? Contd..
Selling below cost for 5 years thereby continuously incurring losses, it was not
normal price.
No prudent business person would continuously suffer huge loss only to penetrate
market
It was extra commercial consideration in fixing of price, and artificially depressed it
It is immaterial that no allegation was made that buyer was related person or there
was flowback directly from buyer to seller - Allegation that price was not the sole
consideration was sufficient
[CCE Mumbai v. Fiat India Pvt Ltd. [2012(283) ELT 161 (SC)]
CA Vasant K. Bhat9
Selling below cost - Is there any Non-Monetary Consideration? Contd..
Manufacturer selling goods at price less than cost of manufacturing - It may be
considered normal price when assessee wants to switch over their business for any
other manufacturing activity, or
where goods cannot be sold within a reasonable time
[CCE Mumbai v. Fiat India Pvt Ltd. [2012(283) ELT 161 (SC)]
CA Vasant K. Bhat10
Difference between Assessable Value in Excise & Transaction Value in GST
Assessable Value in Excise Transaction Value in GST
Value shall be the transaction value, where;- Goods are sold by the assesse for
delivery at the time and place of removal
- Assessee and Buyer are not related- Price is the sole consideration
Value shall be the transaction value, where;- Supplier and Recipient are not related- Price is the sole consideration
Excludes:Excise duty, Sales Tax and other taxes
Includes:-Any taxes, duties, cesses, fees and charges levied under any law other than CGST Act, SGST Act UTGST Act and GST (Compensation to states) Act.
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Difference between Assessable Value in Excise & Transaction Value in GST Contd..
Assessable Value in Excise Transaction Value in GST
Excludes: - No excise duty on interest or late fee or
penalty for delayed payment
Includes:- Interest or late fee or penalty for
delayed payment of any consideration
Excludes:- Discounts (Quantity discounts/cash
discount)
Excludes:- Discount given before or at the time of
supply and recorded in the invoice
- Year end discount etc shall be allowed, if opted for provisional assessement at the time of clearance
- Post supply discount, if • Specified in the agreement entered
into at or before the time of supply• Specifically linked to relevant invoice• Recipient reverses the ITC
attributable to discountCA Vasant K. Bhat
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Difference between Assessable Value in Excise & Transaction Value in GST Contd..
Assessable Value in Excise Transaction Value in GST
Provision for price-cum-duty is in the Act Provision for value inclusive of tax is provided in the Valuation Rules. [Rule 9]
Note: 1Note: 2
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Difference between Assessable Value in Excise & Transaction Value in GST Contd..
Note 1:
Sec 15. (1) The value of a supply of goods or services or both shall be the transaction
value, which is the price actually paid or payable for the said supply of goods or
services or both where the supplier and the recipient of the supply are not related
and the price is the sole consideration for the supply.
Note 2:
Sec 15.(4) Where the value of the supply of goods or services or both cannot be
determined under sub-section (1), the same shall be determined in such manner as
may be prescribed.
Cum-Tax computation is not available if transaction value is accepted???CA Vasant K. Bhat
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Valuation for Customs versus Valuation for IGST
Valuation for Customs Valuation for IGST
Assessable value is transaction value as per Sec 14 of the Customs Act
Valuation for IGST is Assessable Value for customs duty + Basic Customs Duty
[Sec 15(2) of CGST Act-other taxes to be included]
Education cess will be on Assessable Value + Basic Customs Duty
GST Compensation Cess will be on Assessable Value for customs duty + Basic Customs Duty
CA Vasant K. Bhat15
Stock Transfer Vs. Sale on Approval
Stock Transfer Sale on Approval
Supply to distinct person (located outside state) liable for GST
Goods can be sent for approval for sale or return
Invoice is to be issued at the time or before supply
Invoice need to be issued before or at the time of supply or 6 months from the date of removal, whichever is earlier
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