Valuation and Exemptions

Valuations

Currently, GST will be charged on the ‘transaction value’. Transaction value is the price actually paid(or payable) for the supply of goods/services between un-related parties (i.e., price is the sole consideration)

The value of supply under GST shall include:

1. Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST Compensation Cess will be excluded if charged separately by the supplier.
2. Any amount that the supplier is liable to pay which has been incurred by the recipient and is not included in the price.
3. The value will include all incidental expensesin relation to sale such as packing, commission etc.
4. Subsidies linked to supply, except Government subsidies will be included.
5. Interest/late fee/penalty for delayed payment of consideration will be included.

Exempt supplies comprise the following three types of supplies:

1. Supplies taxable at a ‘NIL’ rate of tax* (0% tax);
2. Supplies that are wholly or partially exempted from CGST or IGST, by way of a notification amending Section 11 of CGST Act or Section 6 of IGST Act;
3. Non-taxable supplies as defined under Section 2(78) – supplies that are not taxable under the Act (For Example Alcoholic liquor for human consumption.

Central or the State Governments are empowered to grant exemptions from GST. Conditions are:

1. Exemption should be in public interest
2. By way of issue of notification
3. Must be recommended by the GST Council
4. Absolute exemption or conditional exemption may be for any goods and / or services of any specified description.
5. Exemption by way of special order (not notification) may be granted exceptional circumstances.
6. Registered person supplying the goods and / or services is not entitled to collect tax higher than the effective rate, where the supply enjoys an absolute exemption.

Types of Exemptions:

Absolute exemption: Exemption without any conditions.

Ex: Transmission or distribution of electricity by an electricity transmission or distribution utility, Services by Reserve Bank of India.

Conditional Exemption: Exemption subject to certain conditions.

Ex: Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation less than ` 1000/- per day”.

Conditional or partial exemption:

Intra-State supplies of goods and/or services received from an unregistered person by a registered person is exempted from payment of tax under reverse charge provided the aggregate value of such supplies received by a registered person from all or any of the suppliers does not exceed ` 5000/- in a day.