Value for charging GST

[Kaustubh Karandikar]

XYZ (Client from Delhi) had entered in to a Contract with PQR (a chartered accountant from Mumbai) to carry out audit of their records. As per the contract, the amount payable by XYZ to PQR towards professional fees will be ₹ 100000/- + the amount to be paid towards hotel stay, air fare etc. which will be directly paid by XYZ to hotel and the airlines. PQR is required to pay GST on ₹ 100000/- only or ₹ 100000/- + amount paid by XYZ towards hotel stay, air fare etc. directly to the hotel and the airlines?

[Rajagopalan Ranganathan]

Sir,

As per Section 15 of CGST Act, 2017, "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;

(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;

(c) 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;

(d) interest or late fee or penalty for delayed payment of any consideration for any supply; and

(e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation. - For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

As per clause (c) of sub-section 2 of Section 15 "incidental expenses" is includible in the transaction value.

As per clause (b) of sub-section 2 of Section 15 the value of supply shall include 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.

Therefore, in my opinion, in your case PQR has to pay GST on ₹ 100000/- + amount paid by XYZ towards hotel stay, air fare etc.

[Spudarjunan S]

Dear Sir,

In the given situation you need to verify the agreed arrangement between XYZ and PQR. Based on the agreement the reply may vary as follows :-

If XYZ has agreed to arrange all the facilities like travelling, accomodation etc. to PQR; then PQR needs to charge GST only on ₹ 1,00,000/-

If XYZ doesn't agreed for any such agreement but still he pays from his pocket then clause (b) of sub-section (2) of section 15 comes into effect which says - "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" In this case, PQR has to discharge GST on ₹ 1,00,000 + expenses incurred by XYZ on behalf of PQR.

[KASTURI SETHI]

GST is payable on 100000/- + Hotel stay, Air fare etc.

[YAGAY and SUN]

GST is payable on Gross Value charged i.e. including Reimbursement of expenses.

AI Summary

Taxable value inclusion: reimbursements and incidental expenses paid by a recipient may increase the supplier's GST liability.
GST valuation requires including in transaction value incidental expenses charged by the supplier and any amount the supplier is liable to pay that has been incurred by the recipient; if the recipient directly pays travel or accommodation that the supplier is liable for or that constitutes supplier consideration, those reimbursements must be included in the supplier's taxable value, whereas expressly agreed direct provision by the recipient need not be added.