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Determining Value of Supply under GST when Consideration Is Not Wholly In Money

We are all familiar with the concept of ‘barter system’ that prevailed in the early days of civilization. It was then that people would engage into exchanging goods/ services for other goods/ services in return, also without any consideration of money. Similarly, bringing back the bygone days are businesses in this day and age, operating in a vigorous way and rolling out schemes where a buyer can purchase a product and pay for it partially in money and partially in exchange of used goods. As a general principle under GST India, the value of supply is the amount of consideration received in money from the buyer, but what happens when the consideration of supply is partially in money and partially otherwise? In this post, we have attempted to explain this query.

In such business cases, the GST valuation rule needs to be followed and the valuation of supply will be considered as:

1. Open Market Value (OMVof supply of goods/ services will be the full amount which is without bias available in open market, i.e., excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction. For instance, a brand new laptop is supplied at Rs.50,000 in exchange of an old laptop. If the price of the laptop without exchange is Rs.50,000, then the open market value will be Rs.50,000, and hence, GST will be levied on this value.

 2. When the open market value of goods/ services is not available, then sum total of consideration in money and the monetary value of consideration not in money method of valuation is applicable. This means that the amount received in money is added with the monetary value of the products or services received as consideration. For example, Where a refrigerator is supplied for Rs. 40,000 along with a barter of a cooler that is manufactured by the recipient and the value of the cooler known at the time of supply is Rs. 4,000 but the open market value of the refrigerator is not known, the value of the supply of refrigerator is Rs. 44,000. Considering this example, Consideration in Money (Rs. 40,000) + Monetary value of consideration not in money (Rs. 4,000) = Taxable Value (Rs. 44,000).

 3. If the value is not determinable under the points above, the value of supply of goods and/or services will be determined based on the prices of products of the ‘like kind and quality’ of the product being supplied. To determine the ‘like kind and quality’ of goods/ services, factors such as similar characteristics, quality, quantity, functional components, materials, resemblance and reputation will be considered.

 4. If the value is not determinable under all the above clause, then the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined on the basis of Residual Method or Cost Method will be considered.



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