How to calculate the taxable value for a Tax Invoice under GST?

Calculating the taxable value has always been the crucial and most important step in arriving at the tax liability. As a tax payer, you must have questions such as:

How to calculate taxable value, gross value or net value to calculate taxes such as SGST, CGST or IGSCT?

Trade discount forms part of taxable value?

Loading, unloading and shipping charges form part of taxable value?

Tax on cash discounts!!!

Tax on free supplies or zero value goods?

What is the value of supply or sale?

Section 15 (1) of CGST ACT, 2017 provides that 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.

Tax should be paid on transaction value if:

• Supplier (seller) and the recipient (buyer) are not related, and

• Price paid or payable is the sole consideration for the supply.

If above both conditions are not satisfied, than taxable value or value of supply should be calculated as per Valuation Rules notified by Government.

What should be included in value of supply or sale, whether tax is payable on commission, loading, transportation charges etc. included in invoice?

Section 15(2) provides that value of supply shall include:

1. any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;
2. any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;
3. incidental expenses,including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;
4. interest or late fee or penalty for delayed payment of any consideration for any supply; and
5. subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

In short, this section provides that following other charges should be added to transaction value:

• Taxes paid other than paid under different GST Acts,
• Any amount which was to be paid by seller but incurred by buyer,
• Expenses such as commission, packaging, delivery charges incurred by seller at the time or before making delivery of goods or supply of services,
• Interest, penalty or late fee charged by seller,
• Subsidies directly linked to the price excluding subsidies provided by government.

It is clear that any expense incurred to make delivery or supply of goods or services is liable to tax.

Whether tax is payable on trade discount or other discount provided?

As per section 15(3),  value of supply shall not include any discount which is given:

• before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
• after the supply has been effected, if—
  • such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
  • input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

An example of valuation:

Valuation of taxable supply

Particulars	Amount ( In Rs. )
Value of Goods or services	1,00,000
Loading and Unloading charges	15,000
Shipping Charges	5,000
Gross Value	1,20,000
Less: Trade Discount	-2,000
Taxable Value	1,18,000