Value of Taxable Supply — Section 15 of the CGST Act, 2017

1. What Section 15 does

Section 15 answers a fundamental GST question: “On what monetary value should GST be calculated?”

Section 15 is the central valuation provision of the CGST Act. It starts with the normal commercial rule—use the transaction value where the supplier and recipient are not related and price is the sole consideration—and then provides rules for additions, discounts, non-monetary consideration, related-party transactions and prescribed valuation methods.

The current CBIC text states that the transaction value is the price actually paid or payable where supplier and recipient are not related and the price is the sole consideration. It also separately identifies statutory inclusions and exclusions. citeturn0search0turn0search6

2. Complete statutory structure

Section 15 has been in force from 1 July 2017. The current official CBIC page also shows an important 2026 amendment marker: Finance Act 2026 section 153 substitutes the post-sale discount wording, but the amendment is yet to be notified into force. citeturn1search1

3. Transaction value — Section 15(1)

The normal rule has three cumulative conditions:

Example

A contractor supplies taxable construction services to an unrelated customer for ₹1 crore, and ₹1 crore is the only consideration. Subject to Section 15(2) inclusions and Section 15(3) valid discounts, the transaction value is the starting point for valuation.

4. Price must be the sole consideration

If the recipient provides something else in addition to money—for example, another product, asset, service or other non-monetary consideration—the transaction may fall outside the straightforward Section 15(1) route.

In such a case, the valuation mechanism moves into the prescribed rules, particularly Rule 27 for consideration not wholly in money.

Example — exchange transaction

A new machine is sold for ₹20 lakh plus an old machine supplied by the customer. The value cannot be determined merely from the ₹20 lakh cash component if the old machine is part of the consideration. Rule 27 provides the valuation sequence for such cases. CBIC's valuation rules illustrate the same principle using a new phone supplied against an old phone. citeturn0search1

5. Section 15(2) — amounts that must be included

Even where transaction value under Section 15(1) is available, Section 15(2) requires specified amounts to be added to the value.

The current CBIC text reproduces all five categories. citeturn0search0

6. Section 15(2)(a) — taxes, duties, cesses, fees and charges

The value includes taxes, duties, cesses, fees and charges levied under laws other than the specified GST laws where they are charged separately by the supplier.

Practical logic

GST itself is not added to taxable value merely because it is shown on the invoice. Section 15(2)(a) is directed at other statutory levies falling within the clause.

For every statutory charge, identify its legal character first. Do not automatically add every amount described as “tax”, “fee” or “cess” without checking whether it falls within the wording of Section 15(2)(a).

7. Section 15(2)(b) — supplier's liability paid by recipient

This clause prevents a supplier from excluding an amount from taxable value merely because the recipient, rather than the supplier, physically pays it.

Example

Suppose a supplier is contractually liable to bear a particular statutory or supply-related expense, but the customer pays that expense directly on the supplier's behalf. If the amount is not already included in the price, Section 15(2)(b) can require it to be added to the taxable value.

8. Section 15(2)(c) — incidental expenses and charges

Section 15(2)(c) includes incidental expenses such as commission and packing and amounts charged for anything done by the supplier in respect of the supply at or before delivery of goods or supply of services.

In construction contracts, this provision should be considered alongside the contract's treatment of mobilisation, design, testing, inspection, site establishment, freight and other charges. The legal result depends on the nature of the charge and whether it is connected with the supply.

9. Section 15(2)(d) — interest, late fee and penalty

Interest, late fee or penalty for delayed payment of consideration is included in value under Section 15(2)(d).

Example

A taxable service is supplied for ₹10 lakh and the customer later pays ₹50,000 as contractual interest for delayed payment. The ₹50,000 falls within the statutory valuation provision. The separate time-of-supply treatment for this additional amount must also be considered under Section 13(6) for services or Section 12(6) for goods.

10. Section 15(2)(e) — subsidies directly linked to price

Subsidies directly linked to the price of a supply are included in value, except subsidies provided by the Central Government and State Governments.

The section also explains that the amount of subsidy is included in the value of the supply of the supplier who receives the subsidy.

Practical review

• Identify the subsidy provider.
• Read the subsidy scheme and eligibility conditions.
• Determine whether the amount directly affects the price of the supply.
• Establish who receives the subsidy.
• Document why it is included or excluded under Section 15(2)(e).

11. Section 15(3) — discounts that are excluded

Section 15(3) creates a specific statutory route for excluding discounts from taxable value.

A. Discount before or at the time of supply

A discount given before or at the time of supply is excluded where it is duly recorded in the invoice.

B. Discount after the supply

Under the currently operative Section 15(3)(b), a post-supply discount can be excluded if the statutory conditions are met, including issuance of a supplier credit note and reversal of attributable ITC by the recipient, together with the conditions concerning prior agreement and invoice linkage that remain operative until the 2026 amendment is brought into force.

CBIC Circular 92/11/2019-GST explains the treatment of post-supply/volume discounts and distinguishes discounts from additional consideration for promotional activities. citeturn1search40turn2search5

12. Post-sale discount and ITC reversal — detailed treatment

The most important operational issue in a post-sale discount is the relationship between the supplier's reduction in output tax and the recipient's corresponding ITC reversal.

Circular 212/06/2024-GST provided a mechanism for evidence of recipient ITC reversal, including CA/CMA certification or an undertaking in specified lower-value cases. However, the Government subsequently withdrew that circular through Circular 253/10/2025-GST dated 1 October 2025. Therefore, the old 212/2024 evidence procedure should not be presented as the current mandatory mechanism. citeturn1search36turn1search38

13. Finance Act 2026 — important current-law warning

Finance Act 2026, section 153, substitutes Section 15(3)(b). The amended wording removes the present requirements in clause (b)(i) concerning a discount being established by an agreement entered into at or before the time of supply and specifically linked to relevant invoices.

14. Related persons — why Section 15 valuation changes

Transaction value under Section 15(1) assumes the supplier and recipient are not related. Section 15 contains a detailed explanation identifying relationships such as:

• officers or directors of one another's businesses;
• legally recognised partners;
• employer and employee;
• direct or indirect ownership, control or holding of 25% or more of outstanding voting stock/shares in both entities;
• one person directly or indirectly controlling the other;
• both controlled by a third person;
• together controlling a third person; or
• members of the same family.

The explanation also treats legal persons as persons and treats sole-agent, sole-distributor or sole-concessionaire relationships as related for this purpose. citeturn0search0

15. Distinct persons and Schedule I

GST treats different registrations of the same legal entity in different States/UTs as distinct persons under Section 25. Supplies between distinct persons in the course or furtherance of business can therefore have GST implications even when there is no conventional third-party sale.

Schedule I separately identifies certain activities between related/distinct persons as supplies even without consideration. This is particularly important when applying Section 15 to internal services, shared costs, cross-charges and head-office/branch arrangements.

The GST Council's corporate-guarantee material expressly links Schedule I, related persons and Section 15 valuation with Rule 28. citeturn2search4turn2search30

16. Consideration not wholly in money — Rule 27

Where consideration is not wholly in money, Rule 27 provides a valuation sequence:

1. open market value;
2. if unavailable, total monetary consideration plus the known money equivalent of non-monetary consideration;
3. if still unavailable, value of goods/services of like kind and quality;
4. if still unavailable, monetary consideration plus the amount determined under Rule 30 or Rule 31.

CBIC's valuation rules illustrate the principle with exchange of an old phone against a new phone and with barter of a printer against a laptop. citeturn0search1

Business examples

• barter transactions;
• trade-in / exchange offers;
• advertising exchanged for goods or services;
• service provided partly for shares or other assets;
• settlement of consideration through non-cash arrangements.

17. Rules 27–35 — the valuation ladder

CBIC's current valuation-rules page reproduces the valuation hierarchy, including Rules 27–35. citeturn0search1

18. Related/distinct person valuation — Rule 28

Rule 28 generally starts with open market value, then like kind and quality, followed by Rules 30/31. It contains an important proviso: where the recipient is eligible for full input tax credit, the value declared in the invoice is deemed to be the open market value in the ordinary Rule 28 framework.

However, this general framework must not be mechanically applied to categories for which a special valuation provision exists—such as corporate guarantees under Rule 28(2).

19. Corporate guarantee valuation — Rule 28(2)

Corporate guarantees between related persons became a major GST valuation issue after Rule 28(2) was inserted by Notification No. 52/2023-Central Tax dated 26 October 2023.

The rule provides a specific deemed value for the supply of services by a supplier to a related recipient by way of providing a corporate guarantee to a banking company or financial institution: 1% of the amount of the guarantee offered, or the actual consideration, whichever is higher. citeturn2search30

Example

Company A gives a corporate guarantee of ₹100 crore for its related company to a bank. If Rule 28(2) applies and actual consideration is lower than ₹1 crore, the deemed value is ₹1 crore. The exact applicability, guarantee amount, amendments and transaction facts must be documented.

20. Pure-agent expenses — Rule 33

Not every amount recovered from a customer automatically becomes taxable value. Rule 33 allows qualifying expenditure incurred by a supplier as a pure agent of the recipient to be excluded if all prescribed conditions are met.

CBIC's Rule 33 illustration uses company-incorporation-related statutory fees paid by a service provider as a classic pure-agent example. citeturn0search1

21. Special valuation rules — Rule 32 and other cases

Rule 32 contains special valuation methods for specified supplies. Examples include:

• foreign currency / money changing;
• air travel-agent services;
• life insurance;
• second-hand goods where specified conditions are satisfied;
• tokens, vouchers, coupons and stamps redeemable against supplies;
• certain notified services between distinct persons where the rule prescribes a NIL value.

The existence of these rules demonstrates that Section 15(4) is not a single alternative formula. It is the gateway to a structured set of prescribed valuation methods. citeturn0search1

22. Import of services from related persons — full ITC clarification

Section 15 becomes particularly important for cross-border related-party services because Schedule I can deem certain related-party imports to be supplies even without consideration.

Circular 210/04/2024-GST addressed valuation of import of services by a related person where the Indian recipient is eligible for full input tax credit. The circular was issued because field-level demands had arisen from expansive interpretations of related-party service arrangements. citeturn2search27

23. Construction and infrastructure — Section 15 in practice

Construction and infrastructure businesses have complex valuation because contracts can contain multiple charges and commercial adjustments.

24. Detailed practical examples

Example 1 — ordinary sale

Supplier sells machinery to an unrelated customer for ₹50 lakh, with no non-monetary consideration. Subject to statutory additions and valid discounts, ₹50 lakh is the starting transaction value.

Example 2 — packing charge

Supplier charges ₹50 lakh for goods plus ₹2 lakh packing charged in connection with the supply. Section 15(2)(c) requires the incidental packing charge to be included where it falls within the clause.

Example 3 — customer pays supplier's liability

A supplier is contractually liable for an expense of ₹1 lakh, but the recipient pays the third party directly. If the expense falls within Section 15(2)(b) and is not already included, it can form part of taxable value.

Example 4 — post-sale volume discount

A manufacturer grants a ₹10 lakh post-sale discount through a GST credit note. The supplier must test the operative Section 15(3)(b) conditions, including the recipient's attributable ITC reversal and the current agreement/invoice-linkage requirements until the Finance Act 2026 amendment becomes operative.

Example 5 — commercial discount with promotional activity

A manufacturer gives an additional ₹5 lakh to a dealer only if the dealer conducts a promotional campaign. The commercial description “discount” does not end the analysis. The arrangement may represent consideration for a separate service by the dealer, as explained in GST Council material. citeturn2search5

Example 6 — pure agent

A consultant pays a statutory registration fee of ₹20,000 on behalf of the client under the required pure-agent conditions and recovers exactly ₹20,000. If all Rule 33 conditions are satisfied, the amount can be excluded from value.

Example 7 — related-party service

Head office supplies services to a related group entity. The invoice amount cannot automatically be accepted as ordinary transaction value; Rule 28 must be considered.

Example 8 — corporate guarantee

A holding company provides a ₹50 crore corporate guarantee to a bank for its subsidiary. If Rule 28(2) applies, the special deemed valuation mechanism must be tested rather than relying only on the absence of guarantee commission.

25. Legislative & GST Council timeline

26. Important circulars and official guidance

These are not substitutes for the Act and Rules. They should be used to understand implementation and then checked against the statutory text applicable to the transaction period. citeturn1search40turn2search1turn2search27turn1search38

27. Professional Section 15 valuation workflow

28. Audit documentation — what should be retained?

29. Common mistakes

• Assuming invoice value is automatically taxable value.
• Ignoring Section 15(2) additions.
• Treating every reimbursement as a pure-agent amount.
• Calling every post-sale adjustment a discount without checking whether it is consideration for another service.
• Reducing GST through a post-sale credit note without recipient ITC reversal where required.
• Applying the Finance Act 2026 Section 15(3)(b) amendment before its commencement notification.
• Using the withdrawn Circular 212/06/2024-GST as the current evidence procedure.
• Ignoring related-party status before accepting transaction value.
• Using Rule 28's full-ITC proviso without checking whether a special valuation rule such as Rule 28(2) applies.
• Ignoring non-monetary consideration.
• Adding every statutory fee automatically without checking Section 15(2)(a).
• Treating retention money as an automatic discount.

30. Related provisions