Deposit can not be considered as Consideration. Deposit, whether refundable or not, given in respect of the supply of goods or services shall not be considered as payment made for the supply unless the supplier applies the deposit as consideration for the supply. Fines and penalty can not be considered as Consideration. The amount received as fines or penalty for violation of statutory provision will not be considered as consideration. This has been clarified in Para No. Section 15 1 further provides that price should be the sole consideration for supply. If any additional consideration, whether monetary or non-monetary terms is received, the value of such consideration shall be added to the consideration to arrive at the transaction value.
Part 15 - Contracting by Negotiation
Interpretative Notes provide that payment made directly or indirectly by the recipient to the supplier will constitute the price actually paid or payable. Example : Indirect payment. Settlement by buyer whether in whole or in part of debt owned by the seller. This can be elaborated with an example. X makes a supply of Rs.
Y and contract provide that Mr. Y will pay Rs. X and Rs. Z to settle debt of Mr. In this case the price of Rs. The amount of Rs. Y to Mr. Z is also part of consideration for supply of goods. Therefore GST will be paid on entire amount of Rs. Example Discount given after supply which was not known at the time of supply.
As per the standing agreement, a credit period of 30 days is allowed for payment. In this scenario, since the discount was not known at the time of supply, it cannot be claimed as a deduction from the transaction value. The value of supply of goods or services or both which cannot be valued as per section 15 1 , shall be determined as per rules [Section 15 4 ].
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Such valuation may be required in the following situation:. Value of supply of goods or services where the consideration is not wholly in money. Government has notified 10 Nos. Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,. Example Where a new phone is supplied for Rs. Example Where a laptop is supplied for Rs. Rule Value of supply of goods or services or both between distinct or related persons, other than through an agent The value of the supply of goods or services or both between distinct persons as specified in section 25 4 and 25 5 or where the supplier and recipient are related , other than where the supply is made through an agent, shall,-.
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 goods or services:. The above provisions have been included to safeguard the transactions done during the normal course of business between related persons, in good faith.
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Eventually, when TATA Motors sell their products to their end consumers they will only get input credit of what was paid earlier as tax i. Therefore 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 goods or services. Section 25 4 and 25 5 of CGST Act covers those cases where same person has taken separate registration in different state or even in the same state. The value of supply of goods between the principal and his agent shall,-. Example Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and quality in subsequent supplies at a price of Rs.
Another independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of Rs. The value of the supply made by the principal shall be Rs. Example Suppose Peacock Limited is manufacturing office chairs and the cost of manufacturing is Rs. Similar chair in open market is valued at Rs. These chairs are supplied to a furniture showroom at the rate Rs. Now since the open market value is available, Rs. Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and general provisions of section 15 and these rules: Provided that in case of supply of services, the supplier may opt for this rule, disregarding rule In spite of these rules, if a registered person supplying goods or services under GST is still not able to determine the value, he may choose to follow the Residual Method of Valuation.
As per the residual method, where the value of supply of goods or services or both cannot be determined under the cost method i. Rule 30 , the same shall be determined using reasonable means consistent with the principles and general provisions of the GST. Therefore for the supply of service the supplier may opt for this rule, disregarding rule 30 Proviso to Rule A simple interpretation of this rule suggests that supplier can use any method to determine the value of supply under GST, provided such method is justifiable in the case of inquiry.
The registered taxable person should not exploit this method to displace the GST liability as the penal provisions are strict under the new indirect tax regime. Example For example when cost of production is not being able to determine then number of man hours required to complete a job can be taken as a basis under the residual method for the valuation of supply of goods or services.
Note: Lottery run by SG: A lottery not allowed to be sold in any state other than the originating state. Lottery authorised by SG: A lottery which is authorised to be sold in states other than the originating state also. The value of supply of services in relation to purchase or sale of foreign currency, including money changing, shall be determined by the supplier of service in the following manner Example Sold units of USD ,. RBI Reference rate i. RRR: Not available. Value of Supply: INR x. Provided also that a person supplying the services may exercise option to ascertain value in terms of clause b for a financial year and such option shall not be withdrawn during the remaining part of that financial year.
Value of supply will be calculated as below :. The value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be an amount calculated at the rate of:. GST in case if policy is towards risk cover only: Nothing contained in this sub-rule shall apply where the entire premium paid by the policy holder is only towards the risk cover in life insurance. This means that entire policy is towards risk coverage and no amount is towards investment. Therefore entire premium will be subject to GST.
Provided that the purchase value of goods repossessed from a defaulting borrower, who is not registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession. Mr X has defaulted the loan and for which Mr Y took back the possession of the car.
Mr Y sold this car for Rs after 10 months after taking back from Mr X. Value of supply will be computed as under :. If the expenditure or costs has been incurred by a supplier as a pure agent of the recipient of supply then the same shall be excluded from the value of supply, if all the following conditions are satisfied, namely The supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party on authorization by such recipient;.
The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and. The supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to Registrar of the Companies.
The fees charged by the Registrar of the companies registration and approval of the name are compulsorily levied on B. Therefore no GST will be applicable on these two charges incurred as pure agent. Example Some more example of pure agent. Suppose a Customs Broker issues an invoice for reimbursement of a few expenses and for consideration towards agency service rendered to an importer.
The amounts charged by the Customs Broker are as below:. The rate of exchange for determination of value of taxable goods or services or both shall be the applicable the reference rate for that currency as determined by the Reserve Bank of India on the date of time of supply in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act.
Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax, Union territory tax, the tax amount shall be determined in the following manner,. Author is working in a PSU and can be reached at [email protected]. Examples helped me a lot to understand the topic. Congrats Sir for well explained article on Valuation with good number of examples making the topic lucid.
One of the best articles I have read on valuation. Very lucid,easy to understand and with excellent examples. Keep writing. Your email address will not be published. Post Comment. Notice: It seems you have Javascript disabled in your Browser.
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Inclusions in the Transaction Value [Section 15 2 ] 3. Exclusions from Transaction Value [Section 15 3 ] 4. Definition of important terms used in this chapter 5. Valuation Rules 1. Rule Value of supply of goods or services where the consideration is not wholly in money 2. Rule Value of supply of goods or services or both between distinct or related persons, other than through an agent 3. Rule Value of supply of goods made or received through an agent 4. Rule Value of supply of goods or services or both based on cost 5.
Rule Residual method for determination of value of supply of goods or services or both: 6. Rule 31A: Value of supply in case of lottery, betting, gambling and horse racing. Rule Determination of value in respect of certain supplies 8. Rule Value of supply of services in case of pure agent 9. Rule Rate of exchange of currency, other than Indian rupees, for determination of value Rule Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax.
Based on the previous discussion of delta, that means the call position would function as if it Delta Hedging Delta Hedge 9.
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Traders typically try to maintain delta-neutral or close to delta-neutral positions. For example, the delta of the option mentioned above is about 0. The delta of an option is therefore the amount of the stock that we would sell short in order to hedge one unit of the option. Project finance. This is a standard method for risk hedging as explained in textbooks, e. McDonald [18]. In contrast to the approach of Fleten, Wallace, and Ziemba [9], or of [20, 2, 15, 5], with Since Black-Scholes and Merton proposed delta hedging strategy[1], it has become a hot topic in financial world and been widely adopted for option contracts.
We all know that, in diffusion settings without jump and by continuous trading, the delta-hedging strategy under Black-Scholes and Merton model can eliminate financial risks. You can also find this point of delta, gamma, and vega neutrality using hedgeslf. A handful of investment banks and hedge funds are seeking to have Delta Airlines Inc. Certainly, with a high enough transaction cost, RHC hedging will perform better than delta hedging given delta hedging does not take transaction costs into account.
Solving linear systems with matrices.