QUESTION

A registered dealer(RD) purchase raw cotton from agriculturist from Mandi. On such purchase RD is liable to pay Mandi Tax and Nirashit Tax to the Mandi Board. Now the RD pays the GST under RCM on purchase of cotton value . Sir our querry is whether the amount of Mandi tax paid to Mandi Board on purchase is to be added in value of Purchase value while calculating RCM to be paid. 

ANSWER
 

Facts of the case:  A registered dealer purchased raw cotton from an agriculturist from Mandi and paid Mandi Tax and Nirashit Tax to the Mandi Board. Whether the amount of Mandi tax paid to the Mandi Board on purchase is to be added in value of Purchase value while calculating RCM to be paid.

Law Applicable: 

SECTION 15 OF CGST ACT

(2) The value of supply shall include

a)  any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

Interpretation: Section 15(2)(a) requires that value shall include all taxes except GST. The mandi tax is not GST so it should be added to the value of the product to charge GST irrespective of the fact that whether GST is paid on forward charge basis or reverse charge basis. 

Conclusion: Mandi tax shall be included in the value of supply.

Further reply

Question further

I like to mention that in section 15 everywhere it is said "if charged by the supplier". Here the mandi tax is paid by registered dealer to Mandi board and not to the supplier. Please clarify in this regard.

(2) The value of supply shall include

a)  any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

 Answer

I like to further submit that in the section 15(2)(a) and 15(2)(b) every where written by the supplier  but the definition of Consideration is little bit different.  

Section 15: Value of taxable supply.      

(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.

      '(2) The value of supply shall include''

a)     any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

Here also written charged by the supplier

b)    any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;.

Here also any amount that the supplier is written

Further as per section 2(31) of the CGST Act  2017  as reproduced below with implication in this case

  (31) 'consideration' in relation to the supply of goods or services or both includes''

(a)   any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(Here the any payment made or to be made  are Mandi tax and Nirashit tax for the supply of goods. Also payment by receipient or by any other person can be said that the the Mandi tax and Nirashit tax will be part of the transaction value and will be liable to GST

 Kindly send your views keeping the above points.(Reply dt.25.11.2020)