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Basics: GST Laws and Rules Part -3

by | Nov 24, 2020

The Goods and Services Tax (GST) has brought significant changes in the Indian economy. It has been consistently reshaping the tax calculation system. However, it has also confused taxpayers and people in business concerning the GST laws and rules. The new GST tax system has eliminated the cascading taxes on the supply of goods and services. It has successfully replaced indirect taxes such as value-added tax, excise tax, service tax, and other local taxes.

In theory, the implementation of GST and relaxations notified recently might sound great, but how do business owners get ahead with it? This article is part of our basic GST guide; Part-3 briefly summarizes various GST rules and regulations.

GST Rule-1: Title, Commencement & Application

The above mentioned GST laws put together can be termed as Goods and Services Tax (GST) Valuation Rules, 2016. This rule helps determine the value of the supply of goods and services. The law applies to the supply of services and goods under CGST, IGST, and SGST.

GST Rule-2: Definitions

These rules define specific terms as per the context. For instance, the “Act” is defined either as the IGST Act or CGST Act and, in some context, SGST Act. The term “goods of like kind and quality” is used to define physically similar, identical, qualitative, and reputed goods. It describes the value of goods that perform the same functions. Wherein the term “services of like kind and quality” defines the identical or similar services supplied. Any word, expression, or phrase that is not explicitly defined under this rule shall have the same meaning as specified by the law.

GST Rule-3: Determination of Value

The value of any goods or services is considered as transaction value, subject to rule 7 under the GST law. In monetary terms, “transaction value” is the specified value of the supplies. When a transaction consists of both taxable and non-taxable supply, it is identical to the monetary consideration attributed to it. The acceptance of the value remains unchanged even when the supplier and recipient are related.

The value of supplies depends on where goods are being transported from; one business place to another, principal to an agent or visa-versa, one country to another, and the same location. Only supply values specified under subsection (4) of GST law, as per Article 17, are determined according to Rules 4 to 6.

GST Rule-4: Determination of Value of Supply Through Comparison

The value of supplies that cannot be determined under Rule 3 is determined under this rule. For instance, the value of goods and services supplied is determined by the transaction value based on the same quality and kind under the sub-rule provisions (2). Wherein. If the value is being determined under sub-rule (1), various factors have to be considered; the difference in the date of supply and the difference in the quantity and commercial levels. The officer must also consider the difference in composition, design, quality, freight, and insurance charges of the goods and services concerning the place of supply.

GST Rule-5: Value Method

When the value of supply cannot be determined by the rules mentioned above, it is determined under Rule 5 based on the computed value. The value methods include production cost, manufacturing, processing, cost of provision, brand or design charges, profits, and general of the goods and services of the same kind and quality as that of other suppliers.

GST Rule-6: Residual Method

The residual method helps determine the value of goods and services that other rules fail to determine. Rule 6 determines the value using factors consistent with the general and principal provisions of these rules.

GST Rule-7: Rejection of Declared Value

If the concerned authority feels the need to cross-check the value’s furnished details or accuracy, they will ask the supplier to provide additional information as evidence. After receiving further proof, if the designated authorities feel the need to examine the declared value’s accuracy, the value of any such goods or services will be considered deemed. The transaction value of any such goods or services cannot be determined as per the sub-rule (1) under Rule 3.

The reasons for doubt cannot be limited to the significantly higher or lower value of goods or services than the market value of similar products. Authorities cannot reject the determined value based on the description, quality, manufacturing or production date, and quantity. Concerned officers must notify the suppliers by writing the reasons for doubting the accuracy of furnished details of determining value. Further, suppliers will be provided with an opportunity to clarify the doubts before taking the final decision under the rub-rule (1).

GST Rule-8: Valuation in Certain Cases

Pure Agent – The value of goods and services that remain undetermined under any of the rules mentioned above will be contained under Rule 8. The law excludes a service provider’s expenditure as a pure agent from the value of taxable service.

Money Changer – The value of any taxable service supplied, which includes the purchase of foreign currency or currency exchange, is determined by the service provider.


Staying GST compliant while running a business can seem tedious. However, it is one of the significant business operations that help business owners adhere to GST rules in 2020. The daunting accounting tasks become much more manageable with reliable and GST billing and invoicing system. It helps create and send invoices and track inventory as per the notified GST invoice rules. It is easy to use, accessible, and cost-effective.

Imprezz is the pioneer of accounting software in India. It helps bill faster, easier, and keeps track of each transaction while your business can comply with GST laws and rules. You can quickly issue invoices, quotations, notices, purchase orders, credit notes, over dues, balance sheets, and more. We offer a 14 days free trial software program for small businesses. Login to get started!

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