Determine the correct transaction value for the supply of food processing machinery by TechFab Limited to QBL under the GST provisions. (i)…

The value of a supply of goods is the transaction value where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply in terms of section 15 of the CGST Act, 2017. In the current case, price is not the sole consideration for the supply. Apart from monetary consideration, QBL has given TechFab Limited 100 kilograms of specialized, high-grade spices as consideration for such supply. Hence, the value of the supply cannot be determined on the basis of the transaction value in terms of section 15 of the CGST Act, 2017. Here, the value will be determined with the help of rule 27 which specifies that where the consideration for a supply is not wholly in money, the value will be the open market value. Open market value of a supply means the full value of money, excluding the applicable GST, where the supplier and the recipient of the supply are not related and the price is the sole consideration, to obtain such supply at the same time when the supply being valued is made. Thus, in view of above provisions, the correct transaction value for supply of Food Processing Machinery is- Open market value of machine (excluding GST) = 8,85,000 × 100 / 118 = 7,50,000 (i) The total GST payable on this transaction = 7,50,000 × 18% = 1,35,000 (ii) Mr. Vivek, the accountant should value the supply of food processing machinery at the open market value only as per section 15 of the CGST Act 2017 read with rule 27 of the CGST Rules, 2017 as price is not the sole consideration for the supply. Rule 27 of the CGST Rules, 2017 further provides that if the open market value of the supply is not known, the value of the supply will be the consideration in money plus the money equivalent to the non-monetary consideration, if such an amount is known at the time of supply. In the given case, open market value is given, so the money equivalent to the non-monetary consideration shall not be added.