Role of Rate Difference while determining Taxable Value – let’s understand the concept through one Case Study

CASE 12: M/S ULTRATECH CEMENT LTD.(AAR –KARNATAKA)

Applicant : Ultratech Cement Ltd. Manufacturing & supply of cement and allied products.

Question : Rate difference can be considered for arriving transaction value or  not??

Facts : Ultra Tech Cement Ltd is going to provide supply of goods to there Authorized Dealers on Principal to Principal Basis. Also company will provide multiple discount to the authorized dealer. The same has already been mentioned in the agreement.

Finding :

As per section 15(3) of CGST Act:

The value of the supply shall not include any discount which is given—

1. before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply
2. after the supply has been affected provided both the following conditions are satisfied :
3. 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
4. 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.

With reference of this provision Authority made following conclusion : Although about discount is mentioned in agreement But Quantum is not mentioned

Hence not comply with section 15(3) Hence not considered and form part of transaction value.