GST valuation for supplies to distinct persons: invoice value deemed open market value when full input tax credit is available.

Rule 28 of the CGST Rules treats supplies between distinct persons by reference first to open market value, with alternate methods where that value is unavailable. The first proviso permits valuation at 90% of the recipient's onward sale price for goods intended for further supply, while the second proviso independently deems the invoice value to be open market value where the recipient is eligible for full input tax credit. The provisos apply to different situations and are not sequential conditions. Where full input tax credit is available to the recipient distinct person, invoice value may be adopted as open market value.

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Issues: Whether the second proviso to Rule 28 of the Central Goods and Services Tax Rules, 2017 operates independently so that, where supply is made to a distinct person eligible for full input tax credit, the invoice value is deemed to be the open market value.

Analysis: Rule 28 governs valuation of supply between distinct persons and first requires open market value, with alternative methods in the absence of such value. The first proviso permits valuation at ninety per cent of the recipient's onward sale price where goods are intended for further supply as such. The second proviso provides 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. The provisos deal with different situations and there is nothing in the rule to show that the second proviso is subordinate to, or must be read only after, the first proviso. On the facts, the recipient branches were eligible for full input tax credit, so the invoice value could be treated as the open market value.

Conclusion: The second proviso to Rule 28 applies independently in cases where the recipient distinct person is eligible for full input tax credit, and the appellant is entitled to adopt the invoice value as the open market value.

Final Conclusion: The valuation adopted for supplies to distinct persons is governed by the second proviso to Rule 28 where full input tax credit is available, and the contrary ruling was set aside in the appellant's favour.

Ratio Decidendi: The second proviso to Rule 28 is an independent valuation rule for supplies to a distinct person eligible for full input tax credit, and the invoice value is deemed to be open market value without requiring sequential application of the first proviso.

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