Section 15 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the value of taxable supply. It is one of the most important provisions in GST because GST is calculated on the taxable value of a supply.
In simple words, Section 15 explains how the value on which GST is charged should be determined.
As a general rule, the value of supply is the transaction value, meaning the price actually paid or payable for the goods or services or both. However, this rule applies only when the supplier and recipient are not related persons and the price is the sole consideration for the supply.
Section 15 also explains which amounts must be added to the value of supply, how discounts are treated, and when the valuation rules under the CGST Rules have to be used.
What is Section 15 of the CGST Act?
Section 15 is titled “Value of Taxable Supply.”
The provision applies to supplies of:
- Goods
- Services
- Goods and services
The value determined under Section 15 is important because GST is generally calculated by applying the applicable GST rate to the taxable value.
For example, if the taxable value of a supply is ₹1,00,000 and the applicable GST rate is 18%, the GST would generally be calculated on ₹1,00,000.
However, the taxable value may not always be identical to the basic price mentioned in a quotation or agreement. Section 15 specifies various inclusions, exclusions and valuation rules.
Section 15(1) – Transaction Value
Section 15(1) provides the basic rule for determining the value of taxable supply.
The value of a supply is the transaction value, which means the price actually paid or payable for the supply.
However, three important conditions must be satisfied:
- The supplier and recipient must not be related.
- The price must be the sole consideration for the supply.
- The price must be the amount actually paid or payable for the supply.
If these conditions are satisfied, the transaction value is generally accepted as the value of supply.
Example
A supplier sells goods to an unrelated customer for ₹1,00,000.
The customer pays ₹1,00,000 as the consideration for the goods, and there is no additional consideration.
If the conditions of Section 15(1) are satisfied, ₹1,00,000 is generally the transaction value.
GST is then calculated on the applicable taxable value after considering the inclusions and exclusions required under Section 15.
What Does “Price Actually Paid or Payable” Mean?
The transaction value is based on the amount actually paid or payable for the supply.
This means that the valuation is generally connected to the consideration agreed between the supplier and recipient.
However, the amount may need to be adjusted where Section 15(2) requires certain amounts to be included or Section 15(3) permits specified discounts to be excluded.
Therefore, the transaction value should not be understood as simply the amount printed on the invoice in every situation.
When Does Transaction Value Apply?
The transaction value method generally applies when:
- Supplier and recipient are not related persons.
- Price is the sole consideration.
- The transaction satisfies the requirements of Section 15(1).
If these conditions are not satisfied, the value may have to be determined under the applicable valuation rules prescribed under the CGST Rules.
Section 15(2) – Amounts Included in the Value of Supply
Section 15(2) specifies various amounts that must be included in the value of supply.
These inclusions are important because some expenses or amounts may not form part of the basic selling price but are still required to be included for GST valuation.
Section 15(2) currently covers:
- Certain taxes, duties, cesses, fees and charges
- Amounts payable by the supplier but incurred by the recipient
- Incidental expenses and charges for activities connected with the supply
- Interest, late fee or penalty for delayed payment
- Certain subsidies directly linked to the price
Section 15(2)(a) – Other Taxes, Duties, Cesses, Fees and Charges
The value of supply includes taxes, duties, cesses, fees and charges levied under any law in force other than:
- CGST Act
- SGST Act
- UTGST Act
- GST (Compensation to States) Act
where such amounts are charged separately by the supplier.
In other words, certain non-GST statutory charges can become part of the value of supply.
However, the GST taxes themselves are not added to the taxable value merely because they are separately charged.
Example
Suppose a supplier charges:
- Basic price: ₹1,00,000
- A statutory fee covered by Section 15(2)(a): ₹5,000
If the fee is required to be included under the provision, the value for GST purposes can become ₹1,05,000 before calculating the applicable GST.
The exact treatment depends on the nature of the charge and the applicable law.
TCS Under the Income Tax Act
Tax collected at source under the Income Tax Act should not automatically be treated as part of the taxable value merely because it is collected from the buyer.
CBIC clarified that TCS under the Income Tax Act is an interim levy related to the buyer’s possible income-tax liability and does not have the character of a tax on the goods for GST valuation purposes. Therefore, such TCS is not includible in the taxable value under Section 15(2)(a).
This is an important distinction when calculating the GST value of a transaction involving TCS.
Section 15(2)(b) – Supplier’s Liability Paid by the Recipient
Section 15(2)(b) covers an amount that:
- The supplier is liable to pay in relation to the supply,
- The recipient incurs that amount, and
- The amount is not already included in the price actually paid or payable.
Such an amount is required to be included in the value of supply.
Example
Suppose a supplier is contractually responsible for a particular expense of ₹10,000 related to the supply, but the recipient pays that expense directly on behalf of the supplier.
If the amount is not already included in the price, it may have to be added to the taxable value under Section 15(2)(b).
This prevents a supplier’s liability from being excluded from the taxable value simply because the recipient directly incurred the expense.
Section 15(2)(c) – Incidental Expenses
Section 15(2)(c) includes certain incidental expenses charged by the supplier to the recipient.
These include expenses such as:
- Commission
- Packing
- Charges for activities undertaken by the supplier in relation to the supply
The provision covers amounts charged for anything done by the supplier in respect of the supply at or before the delivery of goods or the supply of services.
Example
A supplier sells machinery for ₹5,00,000 and charges:
- Packing: ₹10,000
- Commission: ₹5,000
- Other applicable pre-delivery charges: ₹15,000
Where these charges fall within Section 15(2)(c), they are included in the value of supply.
The taxable value would therefore be determined after adding the applicable charges to the transaction value.
Freight and Transportation Charges
Freight or transportation charges may form part of the value of supply depending on the contractual arrangement and the point at which the supplier’s charges relate to the supply.
Where such charges are charged by the supplier in connection with the supply and fall within the scope of Section 15(2)(c), they are generally included in the value.
Therefore, businesses should not automatically deduct freight or packing charges from the taxable value merely because they are shown separately on an invoice.
The nature of the charge and the terms of the transaction need to be examined.
Section 15(2)(d) – Interest, Late Fee or Penalty
Section 15(2)(d) provides that the value of supply includes:
- Interest
- Late fee
- Penalty
for delayed payment of any consideration for the supply.
Example
Suppose:
- Value of goods: ₹1,00,000
- GST is applicable on the supply.
- Customer pays late.
- Supplier receives ₹2,000 as interest for delayed payment.
The ₹2,000 interest is required to be considered under Section 15(2)(d).
Section 12(6) and Section 13(6) separately determine the time of supply for such additional amounts in the case of goods and services respectively.
Section 15(2)(e) – Subsidies Directly Linked to Price
Section 15(2)(e) deals with subsidies that are directly linked to the price of the supply.
Such subsidies are included in the value of supply, except subsidies provided by:
- Central Government
- State Governments
The provision further explains that the amount of subsidy is included in the value of supply of the supplier who receives the subsidy.
Example
Suppose a supplier sells goods for ₹1,00,000 and receives a ₹10,000 subsidy from a private organisation that is directly linked to the price of the goods.
If the subsidy satisfies the requirements of Section 15(2)(e), the ₹10,000 subsidy is included in the value of supply.
The treatment is different for subsidies provided by the Central Government or State Governments because such government subsidies are specifically excluded from this provision.
Section 15(3) – Discounts
Section 15(3) provides rules for determining whether discounts should be excluded from the value of supply.
There are two broad situations:
- Discount given before or at the time of supply
- Discount given after the supply
The conditions are different for these two categories.
Discount Given Before or at the Time of Supply
Under Section 15(3)(a), a discount given before or at the time of supply is not included in the value of supply if the discount is duly recorded in the invoice issued for the supply.
Example
Suppose:
- Listed price: ₹1,00,000
- Discount shown in invoice: ₹10,000
- Price after discount: ₹90,000
If the discount satisfies Section 15(3)(a), the discount is excluded from the value of supply.
Therefore, the taxable value would generally be ₹90,000 before applying the GST rate.
Post-Supply Discount
A discount given after the supply is subject to separate conditions.
The current operative Section 15(3)(b) provides that a post-supply discount can be excluded from the value of supply where:
- The supplier issues a credit note for the discount, and
- The recipient reverses the input tax credit attributable to the discount in accordance with Section 34.
This wording reflects the amendment made by the Finance Act, 2026, but the CBIC Act portal currently notes that the amendment is yet to be notified. Therefore, the amendment should not be treated as operative until its commencement is notified.
For transactions governed by the currently operative provision, the existing statutory conditions for post-supply discounts continue to be relevant.
Existing Conditions for Post-Supply Discounts
Under the presently operative framework, a post-supply discount can be excluded when:
- The discount is established through an agreement entered into at or before the time of supply.
- The discount is specifically linked to the relevant invoices.
- The recipient reverses the input tax credit attributable to the discount on the basis of the document issued by the supplier.
Therefore, a supplier cannot simply reduce the taxable value after the sale by issuing a discount without considering the statutory conditions.
Example of Post-Supply Discount
Suppose a supplier sells goods worth ₹10,00,000.
The agreement provides that if the customer purchases a specified quantity during the year, a 5% discount will be provided.
The discount is linked to the relevant invoices and the recipient has to reverse the corresponding ITC where required.
If all conditions under Section 15(3)(b) are satisfied, the eligible post-supply discount can be excluded from the value of supply.
The supplier may issue the appropriate credit note in accordance with Section 34.
Section 15(4) – Valuation According to Prescribed Rules
Section 15(4) applies where the value of supply cannot be determined under Section 15(1).
In such cases, the value is determined in the manner prescribed by the CGST Rules.
This becomes relevant where the normal transaction-value method cannot be used.
For example, special valuation rules may be required where:
- Supplier and recipient are related.
- Price is not the sole consideration.
- Consideration is partly or wholly non-monetary.
- The transaction falls into a category requiring a prescribed valuation method.
The relevant valuation rules include Rules 27 to 35 of the CGST Rules, depending on the nature of the transaction.
Section 15(5) – Notified Supplies
Section 15(5) provides another valuation mechanism.
It states that, notwithstanding Section 15(1) or Section 15(4), the value of such supplies as may be notified by the Government on the recommendations of the GST Council shall be determined in the manner prescribed.
This provision allows specific categories of supplies to be subject to special valuation rules.
Therefore, where a notified supply is involved, the taxpayer needs to examine the applicable notification and prescribed valuation method.
Who Are Related Persons Under Section 15?
The Explanation to Section 15 specifies circumstances in which persons are deemed to be related persons.
These include situations where:
- Persons are officers or directors of one another’s businesses.
- Persons are legally recognised partners in business.
- Persons are employer and employee.
- One person directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of both persons.
- One person directly or indirectly controls the other.
- Both persons are directly or indirectly controlled by a third person.
- Together they directly or indirectly control a third person.
- Persons are members of the same family.
- Persons are associated in business in such a way that one is the sole agent, sole distributor or sole concessionaire of the other.
The Explanation also states that the term “person” includes legal persons.
Employer and Employee as Related Persons
An employer and employee are specifically included within the definition of related persons under the Explanation to Section 15.
This does not mean that every transaction involving employees automatically requires a different valuation. The relevant transaction and applicable GST provisions need to be examined.
However, the relationship is important when determining whether the normal transaction-value method under Section 15(1) can be used.
Companies Under Common Control
Where two businesses are directly or indirectly controlled by the same third person, they may fall within the definition of related persons.
Similarly, where persons together control another person, the relationship may fall within the specified definition.
Transactions involving related persons therefore require careful examination of the applicable valuation rules.
Sole Agent, Sole Distributor or Sole Concessionaire
The Explanation to Section 15 also covers persons associated in business where one is the:
- Sole agent
- Sole distributor
- Sole concessionaire
of the other.
Such persons are deemed to be related for the purposes of Section 15.
This can become relevant when determining whether the transaction value can be accepted under Section 15(1).
What Happens When Supplier and Recipient Are Related?
When the supplier and recipient are related, the transaction value under Section 15(1) may not be accepted automatically.
The value has to be determined under the applicable valuation rules.
Rule 28 of the CGST Rules deals with supplies between distinct or related persons, other than supplies through an agent.
The rules generally begin with the open market value and provide further methods where the open market value is not available.
Full ITC Recipient and Rule 28
Rule 28 contains an important provision for cases where the recipient is eligible for full input tax credit.
In such circumstances, the value declared in the invoice is generally deemed to be the open market value, subject to the applicable rule and conditions.
This provision can simplify valuation in eligible related-party or distinct-person transactions.
Open Market Value and Valuation Rules
The CGST Rules provide various methods for determining the value of supply where Section 15(1) cannot be applied.
The valuation framework includes rules relating to:
- Value where consideration is not wholly in money
- Supplies between related or distinct persons
- Supplies through an agent
- Cost-based valuation
- Residual valuation
- Certain specific categories of supplies
The appropriate rule depends on the nature of the transaction.
Value Where Consideration Is Not Wholly in Money
Sometimes consideration for a supply is not entirely in cash.
For example, a business may provide goods in exchange for another product or service.
In such situations, the normal transaction-value method may not be sufficient, and the applicable valuation rules need to be considered.
The GST Council’s valuation framework provides methods for such transactions, including open market value and the value of goods or services of like kind and quality.
Example
A company supplies a laptop in exchange for a printer manufactured by the recipient.
If the value of the printer is known but the open market value of the laptop is not available, the prescribed valuation mechanism can be used to determine the value of the laptop supply.
This illustrates why valuation under GST is not always based simply on the cash amount received.
Pure Agent Expenses and Section 15
Certain expenses incurred by a supplier on behalf of a recipient may be excluded from the value of supply when the requirements for treatment as a pure agent are satisfied.
Rule 33 of the CGST Rules deals with such situations.
A supplier acting as a pure agent must satisfy specified conditions, including:
- Acting on the recipient’s authorisation
- Separately indicating the amount paid on behalf of the recipient
- Not holding title to the goods or services procured
- Not using those goods or services for its own interest
- Recovering only the actual amount incurred in addition to its own supply value
Example
A corporate services provider pays a government registration fee on behalf of its client as a pure agent.
If all Rule 33 conditions are satisfied, the amount paid to the government may be excluded from the supplier’s value of its own service.
However, the supplier’s own professional or service fee remains part of the value of its supply.
Value of Supply Inclusive of GST
Sometimes the amount charged by a supplier is inclusive of GST rather than being exclusive of tax.
Rule 35 provides a formula for calculating the tax component from an amount that is inclusive of GST.
The formula is:
Tax Amount = Value inclusive of tax × Tax Rate ÷ (100 + Applicable Tax Rate)
For example, if a price of ₹1,18,000 is inclusive of GST at 18%, the GST component can be calculated using the prescribed formula.
This helps determine the taxable value and GST component where the quoted price already includes tax.
Why Section 15 Is Important for Businesses
Section 15 is important because the value of supply directly affects the amount of GST payable.
Correct valuation helps businesses:
- Calculate GST correctly
- Prepare accurate invoices
- Account for discounts properly
- Identify amounts that must be included in taxable value
- Handle related-party transactions correctly
- Apply valuation rules where transaction value cannot be used
- Avoid incorrect tax payment
- Maintain proper GST records
An incorrect valuation can result in either excess payment or short payment of GST.
Common Mistakes in GST Valuation
Businesses often make valuation mistakes by considering only the basic selling price.
Some common mistakes include:
Ignoring Incidental Expenses
Packing, commission and other applicable charges may need to be included.
Excluding Supplier’s Liability Paid by the Recipient
If the recipient pays an amount that the supplier was legally or contractually liable to pay, Section 15(2)(b) may require it to be included.
Treating Every Discount as Deductible
Discounts have specific statutory conditions.
Ignoring Post-Supply Discount Conditions
A post-supply discount cannot automatically be deducted from taxable value.
Ignoring Related-Party Rules
Transactions between related or distinct persons may require valuation under the prescribed rules.
Including Income-Tax TCS in GST Value
CBIC has clarified that TCS collected under the Income Tax Act is not includible in taxable value merely because it is collected from the buyer.
Simple Example of Section 15 Valuation
Suppose a supplier sells machinery with the following amounts:
| Particulars | Amount |
|---|---|
| Basic price | ₹5,00,000 |
| Packing charges | ₹10,000 |
| Commission charged by supplier | ₹5,000 |
| Other eligible incidental charges | ₹15,000 |
| Eligible discount shown in invoice | (-) ₹20,000 |
| Taxable value before GST | ₹5,10,000 |
The final taxable value must be determined by applying the relevant provisions of Section 15 and the applicable GST Rules.
The example demonstrates that the taxable value is not always simply the basic price of the product.
Section 15 and GST Rate
Section 15 determines the value on which GST is calculated.
It does not itself determine the GST rate.
The applicable rate is determined under the relevant rate notification and GST provisions.
Therefore:
Section 15 → Determines taxable value
GST Rate Notification → Determines applicable tax rate
For example, if the taxable value is ₹2,00,000 and the applicable GST rate is 18%, the GST calculation would generally be based on ₹2,00,000.
Section 15 and Section 34
Section 15 and Section 34 are closely connected in relation to certain discounts and credit notes.
Section 15 determines whether a discount can be excluded from the value of supply.
Section 34 deals with credit and debit notes.
The current CBIC material also records a 2026 amendment to Section 15(3)(b) that has been enacted but is yet to be notified, while Section 34 has corresponding amendment language that is also marked as not yet effective.
Therefore, businesses should check the commencement status of these amendments for the relevant transaction period.
Section 15 – Important Points
The major points of Section 15 of the CGST Act can be summarized as follows:
- Section 15 deals with the value of taxable supply.
- The normal valuation method is the transaction value.
- Transaction value generally means the price actually paid or payable.
- The supplier and recipient must not be related.
- The price must be the sole consideration.
- Section 15(2) specifies amounts that must be included in the value.
- Certain taxes, duties, cesses, fees and charges other than specified GST taxes can be included.
- Supplier liabilities incurred by the recipient can be included.
- Incidental expenses such as applicable packing and commission charges can be included.
- Interest, late fee and penalty for delayed payment can be included.
- Certain subsidies directly linked to price are included, except Central and State Government subsidies.
- Discounts given before or at the time of supply can be excluded when properly recorded in the invoice.
- Post-supply discounts are subject to statutory conditions.
- If the value cannot be determined under Section 15(1), the prescribed valuation rules apply.
- Government can prescribe special valuation methods for notified supplies.
- The Explanation defines circumstances in which persons are treated as related.
- Pure-agent expenses may be excluded when all applicable Rule 33 conditions are satisfied.
- Rule 35 provides a method for calculating GST where the quoted value is inclusive of tax.
Conclusion
Section 15 of the CGST Act, 2017 provides the basic framework for determining the value of taxable supply for GST purposes. In normal transactions between unrelated parties where price is the sole consideration, the transaction value is generally used.
However, GST valuation does not always stop at the basic selling price. Section 15 requires certain amounts such as applicable non-GST taxes, supplier liabilities incurred by the recipient, incidental expenses, delayed-payment interest and certain price-linked subsidies to be included. At the same time, eligible discounts can be excluded when the statutory conditions are satisfied.
Where the transaction-value method cannot be used, the valuation rules under the CGST Rules become important. Related-party transactions, non-monetary consideration, supplies through agents and certain notified supplies may therefore require special valuation methods.
Businesses should also pay attention to changes in the law. The Finance Act, 2026 has amended Section 15(3)(b), but the CBIC Act portal currently records that this amendment is yet to be notified. Therefore, taxpayers should verify the applicable commencement date before applying the amended post-supply discount provision.
Based on Google's Helpful Content System, this article emphasizes user value, transparency, and accuracy. It incorporates principles of E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness).
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