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GST

Value of Supply Under GST

What is the value of supply under GST?

The amount that a client pays the supplier for the product or service received is known as the value of the supply. This includes additional charges like shipping and handling but does not include GST.

Some non-sales-related actions, like stock transfers between two states, are still taxable transactions. The value of supply in these circumstances is the market value or the amount for which the items are supposed to be sold.

Value of Supply under GST

Why is the value of supply important?

The value of the products and services sold or transferred will determine the amount of GST applied to a transaction.

Depending on the vendor, buyers can pay for transactions with cash, a check, or an electronic transfer. They can also swap other things or services for the seller’s goods or services to pay for non-monetary transactions.

In some circumstances, they can pay for purchases partially in cash and partially in kind by bartering goods or services. Due to this, it is crucial to precisely determine the supply’s value.

How is the value of supply determined?

The value of supply is often equal to the price paid for the products or services, less GST. 

There are two sets of guidelines for determining the value of supply since some transactions are paid in cash and others are done through trade or barter.

  • When a buyer pays the entire cost of the goods or services in cash, the General Valuation Rules are applicable.

The total price or consideration paid in this instance, less the GST on that sum, is the value of the supply.

Value of Supply = Consideration – GST on Consideration.

Any transaction where part or all of the payment is made in the trade as opposed to cash is subject to special valuation rules.

  • Completely non-cash payment

The value of supply is the open market value of the goods or services, less the GST on that amount if the buyer makes all of their payments in trade rather than cash.

OMV – GST on OMV = Value of Supply.

  • Partially non-cash payment

The value of supply is the cash price paid plus the open market value of the traded goods or services, less the GST on that total amount, if the buyer pays partially in cash and partially in trade.

(Monetary Consideration + In-Kind Consideration) – GST on Total Consideration = Value of Supply

Value of Supply for imported goods and services under GST

According to the guidelines outlined in the Customs Act, the value of imported products is determined as follows:

Value of Supply = Custom Value + Import Duty.

The customs value of the imported items plus the amount of the import duty paid to make up the supply’s value. 

The value of the taxable supply for an imported service is the whole consideration multiplied by the applicable tax rate.

Total Consideration X Taxable Percentage =  Value of a taxable supply.

Discounted Supplies under GST

If an item is discounted, its value for GST purposes changes.

Original Value – Discount = Value of the Supply

The supply’s value is equal to the item’s initial cost minus the discount.

Supply of free items under GST

On your invoices, you can declare the value of items you give away for free as a part of the taxable supply and charge GST on that (unless you declare the value/OVM of the item as a part of the taxable supply and charge GST on that as well). This will allow you to claim input tax credits for those items.