QUESTION

We have Purchase Computer in our Company. Today Value of this Computer is Nil after calculation of Depriceation. Company give this Computer to his Employee in nominal cost. Can we paid GST? If yes then which rate is applicable. Rakesh Shah

ANSWER

Facts of the case: GST on Computer given to employee on nominal cost having NIL Book value.

Law Applicable:

SECTION 15 OF CGST ACT
(1) The 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.

RULE 28. Value of supply of goods or services or both between distinct or related persons, other than through an agent.  

The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall-

(a) be the open market value of such supply;
(b) if the open market value is not available, be the value of supply of goods or services of like kind and quality;
(c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order:
Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person:

Provided further 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 the goods or services.

Interpretation: In your case as Computer is given to Employee for nominal cost, then as per section 7 it will be considered as supply in GST, thus GST is required to be paid.

So far as valuation is concerned since Computer is having NIL book value, then in GST valuation is done as per Section 15 i.e. transaction value (nominal amount charged from employee) read with Rule 28 which specifies the value of supply between related persons.

Computer is covered under HSN code 8471 and taxable @ 18%.

Conclusion: GST will be charged on supply of computer to employee @ 18% on valuation done as section 15 read with rule 28.(Reply dt.08-07-2020)