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Value of Supply under GST in Case of Transactions Between Related Persons

Value of Supply in case of related persons

Rule 28 of Central Goods and Services Tax Rules, 2017 states the relevants provisions to determine the value of supply in case transactions between related persons.


A person who is under the influence of another person is called a related person like members of the same family or subsidiaries of a group company etc.


a) persons shall be deemed to be “related persons” if –

  • (i) such persons are officers or directors of one another’s businesses;

  • (ii) such persons are legally recognised partners in business;

  • (iii) such persons are employer and employee;

  • (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them;

  • (v) one of them directly or indirectly controls the other;

  • (vi) both of them are directly or indirectly controlled by a third person;

  • (vii) together they directly or indirectly control a third person; or

  • (viii) they are members of the same family;

(b) Persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.


(c) Distinct persons under Section25 of CGST Act i.e organization having different registration in each state but holds same PAN No.


Under GST law various categories of related persons have been specified and as relation may influence the price between two related persons therefore special valuation rule has been framed to arrive at the taxable value of transactions between related persons.


Transaction value will be considered as value of supply in case where recipient is fully eligible for Input tax credit will be deemed to be the open market value.


In other cases, the following values have to be taken sequentially to determine the taxable value:-

i. Open Market Value.

ii. Value of supply of like kind and quality.

iii. Value of supply based on cost i.e. cost of supply plus 10% mark-up.

iv. Value of supply determined by using reasonable means consistent with principles & general provisions of GST law. (Best Judgement method)


Open Market Value means the full value in money excluding taxes under GST laws, payable by a person to obtain such supply at the time when supply being valued is made, provided such supply is between unrelated persons and price is the sole consideration for such supply.


Supply of like kind & quality means any other supply made under similar circumstances that is same or closely resembles in respect of characteristics, quality, quantity, functionality, reputation to the supply being valued.


Value of supply where supply of goods being intended to supply as such by the recipient, the value would be determined at the option of supplier an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his unrelated customer.

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