Value of Supply: Transaction Value, Discounts, Inclusions/Exclusions and Valuation Rules (Basics) Questions

Question 1

Define value of supply under GST (basic).

Accepted Answer

**Value of supply** is the amount on which GST is calculated for a supply (i.e., the **taxable value**) (concept).

Question 2

What is transaction value (in one line)?

Accepted Answer

**Transaction value** is the **price actually paid or payable** for a supply when conditions are satisfied (concept).

Question 3

GST itself is included in value of supply. (True/False)

Accepted Answer

False. GST (CGST/SGST/IGST) is **excluded** from the value of supply (concept).

Question 4

Name any one inclusion in value of supply (basic).

Accepted Answer

**Packing charges** / commission / incidental expenses charged by supplier (any one) (concept).

Question 5

Discount shown on the invoice reduces taxable value. (True/False)

Accepted Answer

True. An **invoice discount** (properly shown) generally reduces taxable value (concept).

Question 6

When do valuation rules apply in GST (one point)?

Accepted Answer

Valuation rules apply when **transaction value cannot be accepted**, e.g., parties are **related** or price is not the **sole consideration** (concept).

Question 7

List any three inclusions in value of supply (exam points) using a table.

Accepted Answer

Any three inclusions (concept/overview):

| Inclusion | Example |
|---|---|
| Incidental expenses | **packing**, commission, outward freight if charged |
| Taxes/fees (other than GST) | duties/fees charged by supplier (concept) |
| Interest/late fee/penalty | for delayed payment (concept) |
| Subsidy linked to price | non-government subsidies (overview) |

Write any three items in points/table form.

Question 8

Explain treatment of discounts in GST valuation (any three points) with a small table.

Accepted Answer

Discount treatment (basics) (concept):

| Discount type | Treatment |
|---|---|
| **Invoice discount** | reduces taxable value when shown on invoice |
| Post-supply discount | reduces value only if agreed earlier and documented as per conditions (overview) |
| Unrecorded/unsupported discount | may not reduce value (concept) |

Write any three clear points.

Question 9

Compute taxable value and GST: goods 50,000; packing 2,000; invoice discount 1,000; GST rate 18% (show working in a table).

Accepted Answer

Working (concept):

| Particulars | Amount |
|---|---:|
| Goods value | 50,000 |
| Add: **packing** | 2,000 |
| Less: invoice **discount** | (1,000) |
| **Taxable value** | **51,000** |
| GST @ 18% | 9,180 |

GST is calculated on taxable value (concept).

Question 10

Explain transaction value and its conditions (any three points) using a table.

Accepted Answer

**Transaction value** is the price actually paid/payable when valuation conditions are satisfied (concept).

| Condition (overview) | Meaning |
|---|---|
| Parties not **related** | price is not influenced by relationship |
| Price is **sole consideration** | no hidden/non-monetary consideration |
| Proper additions made | include required charges/expenses (concept) |

Write any three conditions with brief meaning.

Question 11

Distinguish between inclusions and exclusions in value of supply (any three points) using a table.

Accepted Answer

In GST valuation, you start with price and then add **inclusions** and remove **eligible exclusions/discounts** (concept).

| Item | Included / Excluded | Example (concept) |
|---|---|---|
| Packing/commission | **Included** | packing charges, commission |
| GST itself | **Excluded** | CGST/SGST/IGST |
| Invoice discount | **Excluded** (reduces value) | discount shown on invoice |
| Interest/late fee | **Included** | late payment charges |

Write any three correct examples (exam style).

Question 12

Write the steps to compute taxable value under GST (any three steps) and draw a small flowchart.

Accepted Answer

Steps (concept):

- start with **transaction value** (price paid/payable)
- add required **inclusions** (packing/commission/charges)
- subtract eligible **discounts** (properly documented)

Flowchart:

```text
Price (transaction value)
   + inclusions
   - eligible discounts
= Taxable value -> GST rate -> GST amount
```

Question 13

Write an exam-style note on value of supply and transaction value in GST (meaning + inclusions/exclusions + discounts) using headings and a table.

Accepted Answer

### Meaning
**Value of supply** is the **taxable value** on which GST is computed. Generally, it is based on **transaction value** (price paid/payable) when parties are not related and price is the **sole consideration** (concept).

### Inclusions/Exclusions (summary table)

| Item | Treatment (concept) |
|---|---|
| Packing/commission/incidental charges | **included** in value |
| GST (CGST/SGST/IGST) | **excluded** |
| Eligible invoice discount | **excluded** (reduces value) |
| Interest/late fee for delay | **included** |

### Discounts
- **Invoice discount** shown on invoice reduces taxable value.
- Post-supply discount reduces value only if properly agreed/documented as per conditions (overview).

Conclusion: Correct valuation ensures correct GST payment and compliance (concept).

Question 14

Explain when valuation rules apply and write the basic valuation methods/hierarchy (exam-style) with a flowchart.

Accepted Answer

### When valuation rules apply
Valuation rules apply when **transaction value** cannot be accepted, e.g., parties are **related** or price is not the **sole consideration** (concept).

### Basic methods (overview)
Valuation may then be based on like kind and quality value, computed value (cost + margin), or residual reasonable means as per rules (overview).

Flow (concept/overview):

```text
Check transaction value conditions
   | If acceptable -> use transaction value (add inclusions, less eligible discounts)
   | If not acceptable -> apply valuation rules (like kind/computed/residual)
```

Conclusion: The objective is to determine a fair **taxable value** for GST (concept).

Question 15

Solve: A supplier sells goods for 1,00,000. He charges packing 3,000 and commission 2,000. He gives an invoice discount of 5,000. GST rate is 18%. Compute taxable value and GST (show a table).

Accepted Answer

### Working

| Particulars | Amount |
|---|---:|
| Goods price | 1,00,000 |
| Add: **packing** (inclusion) | 3,000 |
| Add: **commission** (inclusion) | 2,000 |
| Less: invoice **discount** | (5,000) |
| **Taxable value** | **1,00,000** |
| GST @ 18% | 18,000 |

### Conclusion
GST is computed on the **taxable value** after adding inclusions and reducing eligible invoice discount (concept).

Inclusion	Example
Incidental expenses	packing, commission, outward freight if charged
Taxes/fees (other than GST)	duties/fees charged by supplier (concept)
Interest/late fee/penalty	for delayed payment (concept)
Subsidy linked to price	non-government subsidies (overview)

Value of Supply: Transaction Value, Discounts, Inclusions/Exclusions and Valuation Rules (Basics)

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