GST is charged on the value of supply, so every rupee wrongly added or left out changes the tax. Section 15 of the CGST Act starts with the transaction value and then adds or removes specific items. Valuation questions are the numerical backbone of the CA Inter GST paper, and they reward a neat working note with the legal basis next to each figure.
Transaction value: the starting point
Under section 15(1), value is the transaction value, the price actually paid or payable, when two conditions are met:
- the supplier and the recipient are not related, and
- the price is the sole consideration for the supply.
When either condition fails, or for supplies notified under section 15(5), value is worked out under the valuation rules, which ICAI covers in detail at the CA Final level.
What must be included: section 15(2)
| Clause | Include in value |
|---|---|
| (a) | Taxes, duties, cesses, fees and charges under any law other than the GST laws, if charged separately |
| (b) | Any amount the supplier was liable to pay but the recipient paid, not already in the price |
| (c) | Incidental expenses, including commission and packing, charged by the supplier for anything done before delivery |
| (d) | Interest, late fee or penalty for delayed payment of consideration |
| (e) | Subsidies directly linked to the price, other than subsidies from the Central or State Government |
Two common traps. GST itself is never part of the value. And a subsidy from a non-Government body is included only if it is directly linked to the price; a lump-sum grant is not.
When discounts reduce the value: section 15(3)
- Discounts given before or at the time of supply reduce the value if they are recorded in the invoice.
- Discounts given after the supply reduce the value only if both conditions are met: the discount is in terms of an agreement made at or before the supply and can be linked to specific invoices, and the recipient reverses the proportionate input tax credit.
If a post-supply discount fails these conditions, the supplier can still issue a financial or commercial credit note, but its GST liability does not reduce. The Finance Act, 2026 has proposed simplifying these conditions; treat that change as examinable only when ICAI announces it for your attempt.
A worked example
A supplier sells goods to an unrelated buyer. List price ₹1,00,000; a 10% trade discount shown on the invoice; packing charged separately ₹2,000; a non-GST local levy charged separately ₹1,000; and a subsidy of ₹3,000 from a private foundation, linked to the price of these goods. The buyer later pays ₹500 as interest for paying late.
| Item | ₹ | Basis |
|---|---|---|
| List price | 1,00,000 | Section 15(1) |
| Less: trade discount on the invoice | (10,000) | Section 15(3)(a) |
| Add: packing | 2,000 | Section 15(2)(c) |
| Add: non-GST levy charged separately | 1,000 | Section 15(2)(a) |
| Add: subsidy linked to price, not from Government | 3,000 | Section 15(2)(e) |
| Value of supply | 96,000 |
The ₹500 interest is also part of the value under section 15(2)(d). It is taxed when it is received, because its time of supply is the date of receipt.
From practice
Freight and packing billed as separate lines on a sales invoice are a frequent audit point. If the supplier arranges delivery and charges for it, the amount is part of the value of the goods and is taxed at the goods’ rate, not left out or taxed as a separate service. Quarter-end volume rebates are the other: a rebate agreed in the distributor contract and linked to invoices can go through a GST credit note; an ad hoc year-end incentive usually cannot.
Quick check
Why
Section 15(2)(e) includes subsidies directly linked to price but specifically excludes those given by the Central and State Governments. The other three are inclusions.
Quick check
Why
Under section 15(3)(b), a post-supply discount reduces value only if it was agreed at or before the supply and linked to invoices, and the recipient reverses the related credit. Otherwise only a financial credit note can be issued, with no change in tax.
Exam lens
In valuation answers, give every adjustment its own line with the clause next to it. Even when the final figure is wrong, step marking rewards correct lines.
Frequently asked questions
Is GST included in the value of supply?
No. CGST, SGST, UTGST, IGST and the compensation cess are excluded. Other taxes and levies charged separately are included.
Are freight and packing part of the value?
Yes, when the supplier charges them for anything done before delivery. They are incidental expenses under section 15(2)(c).
When is a post-supply discount deductible?
When it was agreed at or before the supply, can be linked to specific invoices, and the recipient reverses the proportionate input tax credit.
Related reading
- Time of supply under GST: sections 12 and 13
- Supply under GST (Section 7): CA Inter notes
- Blocked credits under section 17(5): full list
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CA Inter GST (Paper 3, Section B) by CA Vivek Kumar: short lectures in Hinglish, a concept-check MCQ after every concept, study notes, revision notes and past-paper practice for every chapter.
Note
Based on Chapter 7 (Value of Supply) of the ICAI BoS Study Material, Intermediate Paper 3 Section B, for May 2027, September 2027 and January 2028 (law as amended up to 30.04.2026). Last reviewed 15 October 2026. The worked example uses illustrative figures.