Valuation of Cross Charge

[THDC India]

Dear Expert,

Kindly share your valuable opinion on following matter:

While cross charge, whether GST component should be reduced from the taxable value due to provision of section 15(2)(a) and thereafter GST should be levied on value obtained after reducing GST component.

[KASTURI SETHI]

No such deduction is allowed.For valuation purpose, also see Section 15(4) read with Section 25(4) of CGST Act and Rule 28 of CGST Rules,2017

[Shilpi Jain]

In case the recipient (distinct / related person) is eligible for full credit, any value can be adopted.

[KASTURI SETHI]

Madam,

Pl. throw light on the words, 'any value' for enrichment of my knowledge.

Thanks a lot.

[KASTURI SETHI]

Dear Querist,

For more details, go through this article/web-link

https://www.taxtmi.com/article/detailed?id=9991

[THDC India]

Dear Sir,

By not reducing the GST component during Cross Charge, wouldn't it violate fundamental of GST i.e. cascading effect of tax. In other words, GST would be charged again on GST component.

For the clarification, Recipient is also not eligible to avail ITC.

[Ganeshan Kalyani]

Proviso to rule 28 states as, "Provided further 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 of the goods or services." In view of this proviso you may change taxable value without GST if the receiving person is able to take credit.

AI Summary

Valuation of cross charge: GST cannot be excluded from taxable value unless recipient is eligible for full input tax credit.
No deduction of GST from the taxable value is permitted for valuation; valuation must follow statutory valuation provisions and rules. Where the recipient is eligible for full input tax credit, the invoice value may be treated as the open market value and parties may adopt an agreed value for cross charges. If the recipient cannot claim input tax credit, the valuation rules do not support excluding GST from the taxable value.