GST Value of Supply in specific Cases

In this article we shall discuss determination of value in respect of few specific supplies:

 

 

  1. Purchase or sale of foreign currency : Money Changing

 Option A

Case 1: Transaction where one of the currencies exchanged is Indian Rupees

Taxable value is difference between buying rate or selling rate of currency and RBI reference rate for that currency at the time of exchange multiplied by total units of foreign currency.

Example

If $1 is bought for Rs. 100 & the RBI reference rate for that currency at the time of exchange is Rs. 99.10, the taxable value shall be Rs. 0.90.

However if RBI reference rate for a currency is not available then taxable value is 1% of the gross amount of Indian Rupees provided/ received by the person changing the money.

Example

Now if the RBI reference rate of $1 is not known, the taxable value shall be Rs. 1.00

Case 2: Transaction where neither of the currencies exchanged is Indian Rupees

Taxable value will be 1% of the lesser of the two amounts the person changing the money would have received by converting (at RBI reference rate) any of the two currencies in Indian Rupees.

Example

Now if $2 is exchanged for 1 Pound. RBI exchange rate for $2 is Rs 200 & 1 Pound is Rs 190. So the taxable value in this case shall be Rs 1.90.

Option B

The below mentioned method can also be adopted by the money exchanger, provided he has to follow the adopted method for whole financial year

  • One percent of the gross amount of currency exchanged for an amount upto one lakh rupees, subject to minimum amount of two hundred and fifty rupees
  • One thousand rupees and half of a percent of the gross amount of currency exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees
  • Five thousand rupees and one tenth of a percent of the gross amount of currency exchanged for an amount exceeding ten lakhs rupees subject to a maximum amount of sixty thousand rupees
  1. Service of booking of tickets for air travel by an air travel agent
Domestic Travel 5% of Basic Fare*
International Travel 10% of Basic Fare

 

The expression ‘basic fare’ means that part of the air fare on which commission is normally paid to the air travel agent by the airlines.

 

  1. Life insurance business     

 

 

S.No. Type of Insurance Method to be adopted
1.

 

Where policy has dual benefits of risk coverage and investment
Gross premium charged xxx

 

(-) Amount allocated for investments or savings if such allocation is intimated to the policy holder at the time of collection of premium. xxx
Taxable value xxx
2. Single premium annuity policy where allocation for investments and savings is not intimated to the policy holder Taxable value is ten percent of the single premium charged from the policy holder.
3. Other cases ·        Twenty five percent of premium charged from the policy holder in the first year

·        Twelve and a half percent of premium charged for subsequent years.

Where insurance policy has benefit of risk coverage only, then taxable value is entire premium charged from the policy holder.

  1. Goods repossessed from a defaulting borrower

Defaulting borrower is not a registered person The purchase value will be purchase price in the hands of such borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.
Defaulting borrower is registered The repossessing lender agency will discharge GST at the supply value without any reduction from actual/notional purchase value.

 

  1. Second Hand Goods

 

The taxable value of supply of second hand goods shall be the difference between the purchase price and the selling price, provided no input tax credit has been availed on purchase of such goods.

However, if the selling price is less than purchase price, that negative value will be ignored.

Persons who purchase second hand goods after payment of tax to supplier of such goods will be governed by this valuation rule only when they do not avail input tax credit on such input supply. If input tax credit is availed, then such supply will be governed by normal GST valuation.

 

  1. Redeemable vouchers/stamps (other than postage stamp)/coupons/tokens

The value of a token, or a voucher, or a coupon, or a stamp which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.

 

 

 

Below are extract of Bare Act:

Rule 32 of GGST rules 2017: Determination of Value of Supply under 

“Determination of value in respect of certain supplies

(1) Notwithstanding anything contained in these rules, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter.

(2) The value of supply of services in relation to purchase or sale of foreign currency, including money changing, shall be determined by the supplier of service in the following manner:-

(a) For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of currency:

Provided that in case where the RBI reference rate for a currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or received by the person changing the money:

Provided further that in case where neither of the currencies exchanged is Indian Rupee, the value shall be equal to 1% of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by RBI.

Provided also that a person supplying the services may exercise option to ascertain value in terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

(b) At the option of supplier of services, the value in relation to supply of foreign currency, including money changing, shall be deemed to be

(i) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, subject to a minimum amount of two hundred and fifty rupees;

(ii) one thousand rupees and half of a per cent. of the gross amount of currency exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees; and

(iii) five thousand and five hundred rupees and one tenth of a per cent. of the gross amount of currency exchanged for an amount exceeding ten lakh rupees, subject to maximum amount of sixty thousand rupees.

(3) The value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent, shall be deemed to be an amount calculated at the rate of five percent of the basic fare in the case of domestic bookings, and at the rate of ten per cent of the basic fare in the case of international bookings of passage for travel by air.

Explanation – For the purposes of this sub-rule, the expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airline.

(4) The value of supply of services in relation to life insurance business shall be:

(a) the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of the policy holder, if such amount is intimated to the policy holder at the time of supply of service;

(b) in case of single premium annuity policies other than (a), ten per cent. of single premium charged from the policy holder; or

(c) in all other cases, twenty five per cent. of the premium charged from the policy holder in the first year and twelve and a half per cent. of the premium charged from policy holder in subsequent years:

Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance.

(5) Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on 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:

Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.

(6) The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.

(7)The value of taxable services provided by such class of service providers as may be notified by the Government on the recommendations of the Council as referred to in paragraph 2 of Schedule I between distinct persons as referred to in section 25, where input tax credit is available, shall be deemed to be NIL.

 

Source: https://studycafe.in/

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