GST Return Filing: How to handle discounts and additional cost

In order to eliminate ambiguities and avoid litigation due to inaccurate or flawed valuation of goods and services, valuation methods have been provided by the law which act as guidelines to businesses while determining the accurate taxable value.

One of the sea changes brought about by the GST era is the way we determine the value of goods and services.

As a business, one needs to be aware of the changes in the valuation method and also how to go about valuation in some special cases, for e.g. additional charges / discounts, branch transfers (which are taxable under GST) and when a supply is made with money not being the consideration.

In order to eliminate ambiguities and avoid litigation due to inaccurate or flawed valuation of goods and services, valuation methods have been provided by the law which act as guidelines to businesses while determining the accurate taxable value.

Valuation of Taxable Supplies under GST
In the previous tax regime, different methods were adopted to determine the value of the supply, for e.g. –
a) Excise – Based on transaction value or quantity of goods or MRP

b) VAT – Based on sale value

c) Service Tax – Based on taxable value of taxable service rendered

However, in the GST regime, the value of goods and / or services supplied will solely be the transaction value, i.e. the price paid / payable at each point in the supply chain.

GST Return Filing: How to handle discounts and additional cost

Additional Charges & Expenses

This may lead us to our next question – how do we account for additional charges and expenses, such as discount, packing charges etc. – under the GST regime? Should they be included or excluded from the transaction value?

Similarly, the following are some charges/expenses of supply, which are included in the transaction value –
a) Incidental expenses such as commission

b) Interest/late fee/penalty charged by supplier for delayed payment

c) Subsidies excluding those provided by the Central and State governments

d) Any tax other than GST

e) Any amount payable by supplier, but incurred by receiver

Thus, the transnational value is basis, for including or excluding the charges, in the valuation under GST.