GST Update on The Hazy View: Open market value

One of the Draft Rules issued deals with the Determination of Value of Supply. It comprises of 8 Rules in its gamut which deal with valuation in different circumstances. While most of the provisions are more or less similar to those in previous law however a few new terms have come into picture. A new concept of “Open Market Value” has been introduced in the Valuation Rules. The term open market value has been defined in the draft rules to mean the full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction, where the supplier and the recipient of the supply are not related and price is the sole consideration, to obtain such supply at the same time when the supply being valued is made. This is more or less similar to comparable goods method prevailing under erstwhile Central Excise Valuation Rules. But this is not prevailing in current valuation rules.

The definition of the term states that it is full value in money but the fact remains that there is possibility of different open market values of a product or service at different geographical locations, difference in prices due to various factors such as quantity purchased, online offers, different sector of customers like government orders, export price etc. Consequently, there is possibility that there are different prices for the same product and there will be confusion as regards the price to be adopted as open market value for the purpose of valuation of the product. The definition of open market value plays a crucial role in the valuation of supplies hence it needs to be more elaborative and specific.

The definition needs to be more detailed as to whether the open market value will be value at which goods/services are supplied by the assessee or value at which good/services are supplied in their own geographical area, at the quantum generally supplied to customers at large. If this consideration is not taken care of then it will lead to unnecessary litigation. For example, the department will adopt the price of 5 units of a particular goods sold in retail to wholesale supply of 5,00,000 quantity of same type of goods. But this will not be acceptable and lead to litigation. Hence, this Rule should take care of such considerations. It should be worded like “ same volume of goods sold at or around the same time to similar type of buyer…..”.

You can follow us at www.capradeepjain.com or at our facebook page at https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/

Comments

GST Update on The Hazy View: Open market value

Post a Comment

Query