Example 37

XY Ltd removed goods from their factory at Delhi to their associate enterprises AB Ltd at Mumbai on 18.04.2016. At the same time same kind and quality goods are received by AB Ltd from independent seller for Rs. 147000. On that date the like kind and quality goods are removed from AB Ltd. at Mumbai to unrelated person for Rs. 152000.

(I)       Calculate Value of supply of goods from XY Ltd to AB Ltd under GST.

(II)      If in the above transaction XY Ltd transfers goods on invoice of Rs. 138000 what would be the value of supply.

(III) Invoice is issued but AB is not eligible For ITC.

Ans.  

(I)    Rule 28(Value of supply of goods or services or both between distinct or related persons, other than through an agent) of Chapter - IV of CGST Rules, 2017, specifies manner to determine value of supply when transaction is made between distinct person and related party.

      According to this rule where open market value of goods is not available value of like kind and goods supplied by another independent supplier at the same time is to be taken which in this case is given as Rs. 147000, hence, the same is the value of supply. Proviso to this rule provides another option to supplier to value the supply that is an amount equivalent to 90% of supply of like goods and quality by recipient to unrelated customer, where the goods are intended for further supply as such by recipient. Thus, at the option of XY Ltd value of supply can be 90% of 152000 = Rs. 136800.                                                                                                                                                                                                                                                                                                                                                 

(II) Where the goods are transferred by XY Ltd at invoice of Rs 138000, proviso to Rule 28 specifies that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services. In this case AB Ltd is eligible for ITC. Thus, according to this proviso open market value shall be deemed as Rs. 138000, which will be treated as the value of supply in this case.

(III)          In case the AB Ltd is not eligible for ITC and invoice is issued for Rs. 138000. In this case value of supply would be the open market value according to the  value of like kind and quality has been calculated in Point (I) above.