CGST Act, 2017 - Chapter IV: Time and Value of Supply
Section 15 of CGST Act - Value of Taxable Supply
Section 15 lays down the basic GST valuation rule. In an ordinary arm's-length supply, where the supplier and recipient are not related and price is the sole consideration, GST is generally computed on the transaction value - the price actually paid or payable. The section also specifies additions, permitted discounts and situations where the prescribed valuation rules apply.
What does "value of taxable supply" mean?
The value of taxable supply is the monetary value on which GST is calculated. Section 15 starts with transaction value. This method applies when two conditions are satisfied: the supplier and recipient are not related, and the price is the sole consideration.
If those conditions are not satisfied, or if the value cannot otherwise be determined under section 15(1), valuation moves to the methods prescribed in the CGST Rules. Important valuation provisions include Rules 27 to 35, dealing with non-monetary consideration, related or distinct persons, agents, cost-based valuation, residual valuation and specified special cases.
Section 15 - Value of Taxable Supply
- 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;
- 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;
- incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;
- interest or late fee or penalty for delayed payment of any consideration for any supply; and
- subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.
Explanation: For this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.
- before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
- after the supply has been effected, if -
- such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
- input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.
What must be added to the transaction value?
| Section 15(2) item | Valuation treatment |
|---|---|
| Other taxes, duties, cesses, fees and charges | Included when charged separately, except the GST enactments and Compensation Cess specified in the section. |
| Supplier's liability paid by recipient | Included where the recipient incurs an amount that the supplier was liable to pay and it is not already in the price. |
| Incidental expenses | Commission, packing and pre-delivery or pre-supply charges by the supplier form part of value. |
| Delayed-payment charges | Interest, late fee or penalty for delayed consideration is included. |
| Price-linked subsidies | Included, except subsidies provided by the Central Government or State Governments. |
Discounts under Section 15(3)
Discount before or at the time of supply
A discount given before or at the time of supply can be excluded from value if it is duly recorded in the invoice. The taxable value is therefore the net invoice value after the qualifying discount.
Post-supply discount - present operative framework
Under the existing wording, a post-supply discount is excluded only when it is established under an agreement entered into at or before the time of supply, is specifically linked to the relevant invoices, and the recipient reverses the input tax credit attributable to that discount.
CGST Valuation Rules to read with Section 15
| Rule | Subject | Core approach |
|---|---|---|
| Rule 27 | Consideration not wholly in money | Open market value first; then money plus known monetary equivalent; then like kind and quality; thereafter Rules 30 and 31. |
| Rule 28 | Distinct or related persons, other than through an agent | Open market value, then like kind and quality, then Rules 30 and 31. Where the recipient is eligible for full ITC, the declared invoice value is deemed to be open market value. |
| Rule 29 | Goods supplied or received through an agent | Open market value or, at the supplier's option in the prescribed case, 90 percent of the onward price of like goods; otherwise Rules 30 and 31. |
| Rule 30 | Cost-based valuation | Generally 110 percent of cost of production, manufacture, acquisition or provision. |
| Rule 31 | Residual method | Reasonable means consistent with section 15 and the valuation rules. |
| Rules 31A to 31D | Specified supplies | Special methods apply to notified categories, including prescribed gaming/casino situations and, from 2026, prescribed retail-sale-price valuation for specified tobacco and pan masala products. |
| Rule 32 | Certain services and second-hand goods | Special optional or prescribed methods for specified supplies. |
| Rule 33 | Pure agent | Qualifying expenditure incurred as a pure agent may be excluded when all prescribed conditions are met. |
| Rule 34 | Exchange rate | Prescribes exchange-rate rules for valuation where consideration is in foreign currency. |
| Rule 35 | Value inclusive of tax | Provides the formula for extracting tax where the value is inclusive of GST. |
Related persons and distinct persons
Section 15 expressly defines when persons are treated as related. This matters because the ordinary transaction-value rule in section 15(1) assumes that supplier and recipient are not related. Supplies between registrations of the same legal person in different States or Union territories are also treated as supplies between distinct persons under section 25 and are generally valued under Rule 28.
For a Rule 28 supply where the recipient is eligible for full input tax credit, the invoice value is deemed to be the open market value. This deeming rule is particularly important for inter-branch and head-office transactions.
Special valuation under Section 15(5)
Section 15(5) authorises the Government, on the recommendations of the GST Council, to notify supplies whose value is determined in the prescribed manner notwithstanding the normal transaction-value framework. Special valuation provisions therefore need to be checked for notified categories before relying only on invoice price.
From 1 February 2026, the valuation framework for specified pan masala and tobacco products was changed to a retail-sale-price based method through the relevant notification and rule amendments. Businesses dealing in notified goods should apply the special valuation provision rather than the ordinary transaction-value rule where the notification applies.
Simple examples
Example 1 - packing charged separately
Goods are sold for Rs. 1,00,000 and packing of Rs. 5,000 is separately charged by the supplier. Subject to the facts of the supply, the packing charge is an incidental expense under section 15(2)(c), so the value becomes Rs. 1,05,000 before GST.
Example 2 - invoice discount
The listed price is Rs. 50,000 and a Rs. 5,000 discount is given at the time of supply and recorded on the tax invoice. The qualifying discount is excluded and the taxable value is Rs. 45,000.
Example 3 - full ITC between related or distinct persons
Where Rule 28 applies and the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value, subject to the rule and the facts of the transaction.
Key compliance points
- Start with section 15(1) and test whether the parties are unrelated and price is the sole consideration.
- Add every amount required by section 15(2), even if it is described separately in the commercial arrangement.
- Apply section 15(3) carefully before reducing taxable value for a discount.
- For related persons, distinct persons, barter or non-monetary consideration, agents and special supplies, check the relevant valuation rule.
- For post-supply discounts, confirm the commencement status of the Finance Act, 2026 amendment before changing the legal test used for GST credit notes and ITC reversal.