Taxable Supply under GST – Methods | Rules | Case Studies

Taxable Supply under GST refers to any supply of goods or services or both that is levied with tax under the GST law. As per Section 2(108) of the CGST Act, 2017, “taxable supply” means a supply of goods or services or both which is leviable to tax under this Act. As defined under Section 2(108) of the Act, a taxable supply means a supply of goods or services or both which is leviable to tax. For a supply to qualify as taxable, it must meet certain conditions—it should be made for a consideration, in the course or furtherance of business, and should not fall under the category of exempt, nil-rated, or non-taxable supplies.

Table of Contents

1. What Are Different Methods of Calculation of Value of Taxable Supply
2. When Value of Supply Shall Be the Transaction Value
3. How to Determine Value of Supply When Valuation Under Aforesaid Provisions Is Not Possible
4. How to Determine Value of Supply Where the Consideration Is Not Wholly in Money [Rule 27]
5. How to Determine Value of Supply Between Distinct Persons or Related Person [Rule 28]
6. How to Determine Value of Supply of Goods Made or Received Through an Agent [Rule 29]
7. How to Determine Value of Supply of Goods/Services Based on Cost [Rule 30]
8. What is Mode for Determination of Value of Supply Under Rule 31
9. How to Determine Value of Certain Supplies Given Under Rule 32

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Parameters to determine taxable value of supply of goods or services are discussed in this article. Broad guidelines are given by section 15. Besides, rules 27 to 35 provide specific mode of determination of taxable value of supply in different circumstances (e.g., when consideration is not in money, supply between related persons, supply through an agent, supply in case of pure agent, supply in relation to purchase or sale of foreign currency/booking of air tickets/insurance policy/second hand goods, etc).

1. What Are Different Methods of Calculation of Value of Taxable Supply

Basis of charge of GST is given by section 9. As per section 9, GST shall be levied on the value of taxable supply of goods/services determined under section 15. Section 15 prescribes the parameters for arriving at value of taxable supply of goods/services which is normally “transaction value”. In certain situations, however, transaction value is not considered for determination of GST liability and in such cases taxable value is determined under Chapter IV of CGST Rules (e., Rules 27 to 35). The table given below gives a bird’s eye view of different methods for computation of value of taxable supply –

2. When Value of Supply Shall Be the Transaction Value

Transaction value is the price actually paid/payable for supply of goods or services or both. Section 15(1) provides that the value of a supply of goods or services or both shall be the transaction value. However, transaction value would be acceptable only when the following two conditions are satisfied – where the supplier and the recipient of the supply are not related; and b. the price is sole consideration for the supply.

When these two conditions are satisfied, transaction value is taken as taxable value of supply of goods/services for calculation of GST liability. However, when the price is influenced by factors like relationship of parties or where certain transactions are deemed to be supply, which do not have a price, the value has to be determined in accordance with the GST Rules.

• Meaning of related persons
• Meaning of consideration

2.1 Inclusion in transaction value – Section 15(2) provides that the following shall be included in the value of supply –

Provisions Illustrated

• Case 1 – X owns a commercial flat. It is given on rent to A Ltd. (rent being Rs. 2,50,000 per month). Besides rent, X recovers house tax of Rs. 90,000 from A Ltd. Taxable value of supply in this case will be Rs. 30,90,000 (e., rent – Rs. 30,00,000 + house tax – Rs. 90,000).
• Case 2 – A theatre charges Rs. 10,000 per person for a musical programme (to be held in Chennai on January 1,2025). Besides, it collects 5 per cent entertainment tax imposed by Tamil Nadu Government. Taxable value of supply for levy of GST will be Rs. 10,500 (e., including entertainment tax).
• Case 3 – X supplies artificial silk to Y at the rate of Rs. 500 per meter. X also collects broker’s commission (which he has paid at the rate of 5 per cent to a broker to get input supply). Taxable value of supply of silk by X to Y will be Rs. 525 per meter (e., including broker’s commission charged by X).
• Case 4 – On July 5, 2024, Z (of Chennai) supplies 25 tons of a chemical to B (of Madurai) at the rate of Rs. 80,000 per ton. Besides, he charges the following – freight – Rs. 3,12,000, packing charges – Rs. 72,000, weighing charges – Rs. 30,000, inspection charges – Rs. 12,000, cost of an instrument which is specially purchased by Z to manufacture this chemical – Rs. 1,10,000 (this instrument cannot be used for other purpose). GST rate is 18 per cent. Inspection charges are directly borne by B and not included in invoice. State Government has paid a subsidy of Rs. 40,00,000 to Z to set up chemical manufacturing plant in Chennai. This subsidy was paid during 2023-24. B is required to make payment within 15 days of supply. However, payment is made in October 2024 and for late payment, Z charges interest of Rs. 11,000. GST liability will be calculated as follows Case 2 –

Note – GST should be paid on or before August 20, 2024 (i.e., 20th day of succeeding month). However, the time of supply to the extent it relates to an addition in the value of supply by way of interest, shall be the date on which interest is received. Consequently, last date of GST payment will be as follows –

• Case 5 – C Ltd. owns a coaching institute in Puri. The institute charges Rs. 18,000 per student for giving training in digital marketing. However, this training programme is subsidized by different institutions as follows – State Government of Orissa – Rs. 500 per student, PQ Charitable Trust – Rs. 200 per student and Government of Japan – Rs. 100 per student. Consequently, C Ltd. charges Rs. 17,200 + GST per student.

In this case, subsidies given by different institutions are directly linked to the price charged by C Ltd. State Government subsidy can be excluded but subsidy paid by others will be included in taxable value. Consequently, value of taxable supply and GST will be calculated as follows –

Note – Amount to be collected from students will be as follows – Rs. 17,200 (transaction value) + CGST – Rs. 1,575 + SGST – Rs. 1,575.

• Case 6 – X sells a desktop to Y for Rs. 60,000. However, an option is given to Y to pay instalments of Rs. 16,000 every month before 8th day of the following month, over next 4 months (e., Rs 16,000 x 4 = Rs. 64,000). Further, the contract specifies that if there is any delay in payment by Y, Y would be liable to pay additional/penal interest to Rs. 400 per month for the delay. Y agrees to pay by way of monthly instalments.

In this case, value of supply of desktop is Rs. 64,000. Even additional interest/penal interest charged for late payment of instalment will be included in “value of supply”.

• Case 7 – In the above case, two separate invoices are issued by X. First invoice for sale of desktop for Rs. 60,000. Second invoice for providing service of extending loan for which Rs. 1,000 per month is charged (and for late payment, an additional penal interest for Rs. 400 per month).

In this case, value of supply of service will be Rs. 60,000 + Rs. 1,000 per month + penal interest of Rs. 400 per month. The benefit of exemption given by Exemption Notification (Entry 27) is not available.

• Case 8 – X sells a desktop to Y for Rs. 60,000. Y has the option to avail a loan from Bajaj Finance Ltd. at interest of 2 per cent per month for purchasing the desktop. The terms of the loan from Bajaj Finance Ltd. allows Y a period of 4 months to repay the loan and an additional/penal interest at the rate of Rs. 400 per month for delay in payment.

In this case, value of supply of desktop by X to Y will be Rs. 60,000. Interest charged by Bajaj Finance Ltd. will be exempt from GST by virtue of Exemption Notification (Entry 27). Even penal interest for late payment, will be covered by Entry 27.

• Case 9 – Under the incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions, the Government pays the acquiring banks an incentive as a percentage of value of RuPay Debit card transactions and low value BHIM-UPI transactions up to Rs. 2,000.

The service supplied by the acquiring banks in the digital payment system in case of transactions through RuPay/BHIM UPI is the same as the service that they provide in case of transactions through any other card or mode of digital payment. The only difference is that the consideration for such services, instead of being paid by the merchant or the user of the card, is paid by the Central Government in the form of incentive. It is, however, not a consideration paid by the Central Government for any service supplied by the acquiring bank to the Central Government. The incentive is in the nature of a subsidy directly linked to the price of the service and the same does not form part of the taxable value of the transaction in view of the provisions of section 2(31) and section 15 – Circular No. 190/02/2023, dated January 13, 2023.

2.2 Exclusion from transaction value – Section 15(3) provides that the value of supply shall not include any discount which is given below –

• Situation 1 – Discount which is allowed before (or at the time of) supply – This discount will not be included in value of taxable supply, if it is duly recorded in the invoice which is issued in respect of such supply.
• Situation 2 – Discount that is allowed after the supply has been affected – This discount will not be included in value of taxable supply if the following two conditions are satisfied —

1. 1. such discount is given under an agreement entered into at (or before) the time of such supply and specifically linked to relevant invoices; and
   2. input tax credit (as is attributable to the discount on the basis of document issued by the supplier) has been reversed by the recipient of the supply.

Provisions Illustrated

• Case 1 – X Ltd. is a biscuit manufacturing company in Bhiwandi (Maharashtra). It generally gives a trade discount of 20 per cent in the list price when goods are purchased by a distributor. During December 2024, it offers Christmas Bonanza under which a special Christmas discount of 10 per cent is given on the list price of all products to its distributors in addition to normal discount of 20 per cent. A Ltd., one of the distributors from Karnataka, purchases 1,000 packets of chocolate biscuits (list price Rs. 40 per packet of 118 gram) on November 30, 2024 and 2,000 packets of the same biscuits on December 1, 2024. GST rate is 18 per cent which may be calculated as follows –

• Case 2 – Y Ltd. manufactures slow juicer (list price for supply to distributors – Rs. 15,000, GST rate – 28 per cent). It offers a special Diwali discount of 12 per cent to its distributors if more than 100 pieces are sold during October 2024. This discount will be available for supplies taken by distributors for November 2024. Z & Co. is one of the distributors in Solapur. It places an order of 70 pieces of juicer on October 30, 2024 for retail sale for November 2024. As data for October 2024 is not available on October 30, 2024, Y Ltd. issues invoice as follows —

Data for October is compiled on November 10, 2024. Total sale made by Z & Co. during October 2024 is more than 100 pieces. Consequently, Z & Co. is entitled for special Diwali discount of 12 per cent in the aforesaid transaction. The point for consideration is whether this discount is available for GST purposes.

Situation 1 is not applicable (discount is allowed after supply). Under Situation 2, one has to satisfy the following two conditions –

1. Whether terms of agreement existed at the time of supply – Yes, they existed.
2. Whether recipient is ready to reverse input tax credit if he has already availed it – This condition can be satisfied by Z & Co. As the aforesaid two conditions are satisfied, discount of 12% will be allowed from the value of supply. Y Ltd. cannot issue revised invoice. It can give a credit note to this effect under section 34(2).

• Case 3 – Suppose in Case 2, on December 31, 2024 Y Ltd. offers a performance discount of 1 per cent to its distributors. This discount is available if total turnover of a distributor for 2024 exceeds Rs. 50,00,000. Turnover of Z & Co. exceeds Rs. 50,00,000 and it is eligible for performance discount of 1 per cent on the turnover of 2024 (including the invoice given above). The point for consideration is whether performance discount is available for GST purposes in the invoice given above.

Under GST, discount is deducted from value of taxable supply only under the following two situations –

Situation 1 – It covers discount given before or at the time of supply. Given case is not covered by this situation.

Situation 2 – It covers the case when discount is allowed (after supply) under an agreement which existed at the time of supply. Performance discount is announced on December 30, 2024. It was not in existence at the time of supply. Consequently, performance discount cannot be deducted from the value of taxable supply.

3. How to Determine Value of Supply When Valuation Under Aforesaid Provisions Is Not Possible

When the value of supply of goods/services cannot be determined under the aforesaid provisions of section 15(1), the same shall be determined as per valuation rules notified by the Government for this purpose. These rules are given by Chapter IV of GST Rules (i.e., Rules 27 to 35).

4. How to Determine Value of Supply Where the Consideration Is Not Wholly in Money [Rule 27]

Rule 27 gives a few parameters to determine value of supply of goods/services where consideration is not wholly in money. These parameters are given below –

Notes –

1. Meaning of “open market value” – It means the full value in money, excluding the IGST, CGST, SGST, UTGST and GST cess payable by another person in a transaction, where the supplier and the recipient of the supply are not related and the price is the sole consideration, to obtain such supply at the same time when the supply being valued is made.
2. Meaning of “supply of goods or services or both of like kind and quality” – It means any other supply of goods or services or both made under similar circumstances that, in respect of the characteristics, quality, quantity, functional components, materials, and the reputation of the goods or services or both first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both.

Provisions Illustrated

• Case 1 – Y, a retailer in New City Square, offers iPhone X for Rs. 89,000 (with exchange offer of any old iPhone). It also offers iPhone X without exchange for Rs. 98,000. Z purchases iPhone X under exchange offer by exchanging an old iPhone 5. Value of old iPhone 5 is not available. In this case, value of supply of iPhone X to Z will be Rs. 98,000 (this case is covered by Situation 1 above).
• Case 2 – X manufactures laptop. Y Ltd. manufactures printer. X Ltd. sells a laptop to Y Ltd. For this supply, Y Ltd. pays Rs. 90,000 and a printer (manufactured by it). Known value of printer is Rs. 3,000. However, value of laptop is not available, Value of supply of laptop by X Ltd. to Y Ltd. will be Rs. 93,000 (this case is covered by Situation 2 above).
• Case 3 – Suppose in Case 2, X Ltd. offers same laptop to others for Rs. 95,000 (without any exchange or barter). Y Ltd. purchases the laptop for Rs. 90,000 (+ a printer of Rs. 3,000). In this case, value of supply of laptop by X Ltd. to Y Ltd. will be Rs. 95,000 (this case is covered by Situation 1 above).
• Case 4 – A sells a music system to B for Rs. 60,000. B provides free tax consultancy to A Ltd. (value of such consultancy is Rs. 10,000). The same music system is normally sold by A Ltd. to unknown person for Rs. 75,000. Value of supply of music system by A Ltd. to B is Rs. 75,000 (this case is covered by Situation 1 above).
• Case 5 – Suppose in Case 4, normal value of music system is not available. Value of supply of music system to B will be Rs. 70,000 (i.e., monetary consideration – Rs. 60,000 + value of consideration in kind – Rs. 10,000) (this case is covered by Situation 2 above).
• Case 6 – Suppose in Case 4, normal value of music system is not available. Even value of tax consultancy is not available. But the same model of music system is sold by another dealer in a nearby city for Rs. 80,000 + handling charges of Rs. 2,000 + GST. Value of supply of music system by A Ltd. to B is Rs. 82,000 (this case is covered by Situation 3 above).
• Case 7 – Suppose in Case 4, normal value of music system is not available. Even value of tax consultancy is not available. But the same model of music system is sold by another dealer in a nearby city for Rs. 80,000 + handling charges of Rs. 2,000 + GST (this dealer gives a free DVD of Rs. 500). Value of supply of music system by A Ltd. to B is Rs. 81,500 (this case is covered by Situation 3 above).
• Case 8 – Suppose in Case 4, normal value of music system is not available. Even value of tax consultancy is not available. The same model of music system is not available in any other store.

In this case, value of supply of music system by A Ltd. to B cannot be determined under Situation 1, Situation 2 and Situation 3. It will be determined in the Situation 4. Under this situation, value of supply will be Rs. 60,000 (being monetary consideration) + value of non-monetary consideration (as determined under rule 30, if it is not possible then one has to apply rule 31) (this case is covered by Situation 4 above).

5. How to Determine Value of Supply Between Distinct Persons or Related Person [Rule 28]

Rule 28 provides mode of valuation when supplier and recipient are related. This rule is also applicable when supplier and recipient are distinct person [i.e., head office and branch office]. But this rule is not applicable when supply is made through an agent.

Under this rule, value of supply of goods or services or both shall be determined as follows –

Provisions Illustrated

• Case 1 – X holds 25 per cent (or more) equity share capital in Y Ltd. (a computer manufacturer) as well as Z Ltd. (a paper manufacturer). Y Ltd. and Z Ltd. are “related persons”. On September 22, 2024, Y Ltd. supplies a computer to Z Ltd. for Rs. 78,000. The same computer is offered by Y Ltd. to unrelated customers for Rs. 85,000. Z Ltd. is not entitled for input credit for this transaction. Value of supply of computer by Y Ltd. to Z Ltd. will be Rs. 85,000 (this is the case of supply of goods between related persons) (this case is covered by Situation 1 above).
• Case 2 – Suppose in Case 1, Y Ltd. supplies computer to Z Ltd. as a gift without charging anything. Normally, if supply of goods/services is made as a gift (without charging anything), GST is not applicable (if consideration is zero, GST is zero). However, this rule is not applicable when supplier and recipient are related or when supplier and recipient are distinct persons. In this case, Y Ltd. and Z Ltd. are related (X controls 25 per cent equity share capital in the two companies). Value of supply will be Rs. 85,000 (as per Situation 1).
• Case 3 – A Ltd. (a software development company) controls 25 per cent (or more) equity share capital in B Ltd. (a technical consultant). A Ltd. develops an accounting software for B Ltd. for Rs. 2,50,000. A similar accounting software is developed by A Ltd. for an unrelated customer for Rs. 3,80,000. B Ltd. is eligible for full input credit for this input supply. A Ltd. and B Ltd. are related persons. B Ltd. is eligible for full input credit. Therefore, value of supply will be the invoice price of Rs. 2,50,000 (this is covered by Situation 6).
• Case 4 – D Ltd. (a computer manufacturing company) holds 30 per cent equity share capital in E Ltd. (a computer distributor). On August 18, 2024, D Ltd. supplies a computer to E Ltd. for Rs. 1,10,000. The same computer is supplied on the same day to an unrelated customer for Rs. 1,40,000. E Ltd. supplies similar computer to its retailers (not related to E Ltd.) for Rs. 1,50,000. D Ltd. and E Ltd. are related persons. Similar computer is supplied by D Ltd. to unrelated customers for Rs. 1,40,000. Rs. 1,40,000 may be taken as value of supply of computer by D Ltd. to E Ltd. Alternatively, at the option of D Ltd. it can be taken as 90 per cent of the price charged by recipient E Ltd. from its unrelated customers. 90 per cent comes to Rs. 1,35,000. Therefore, at the option of D Ltd. value of supply will be Rs. 1,35,000 (this is covered by Situation 4).
• Case 5  – E (an Indian citizen) holds the position of a director at F Ltd. (a manufacturing company located in Mumbai) and he also owns 30 per cent shareholding in F Ltd. Consequently, E and F Ltd. are “related persons”. On March 5, 2025, F Ltd. takes a loan of Rs. 60 lakh for 1 year from SBI and E gives his personal guarantee to SBI for timely repayment of loan by F Ltd. along with interest. Consideration charged by E from F Ltd. for providing the bank guarantee is Rs. 40,000. In this case, the value of supply of guarantee by E to F Ltd. is Rs. 60,000 (i.e., 1 per cent per annum of Rs. 60 lakh or Rs. 40,000, whichever is higher).
• Case 6 – Suppose, in Case 5, loan is partly availed (e., Rs. 50 lakh) during 2024-25 and partly availed (i.e., Rs. 10 lakh) during 2025-26. Moreover, E wants to avail full input tax credit during the financial year 2024-25. The activity of supplying the service of providing the corporate guarantee by E is not linked with the actual disbursal of the loan to F Ltd. The service provided by E to F Ltd. is that of taking on the risk of default. Therefore, the value of the supply of the service of providing the corporate guarantee will be calculated based on the amount guaranteed. Thus, Rs. 60,000 will be the value of supply for the financial year 2024-25. Further, E shall be eligible to avail the input tax credit for the full amount of GST during the financial year 2024-25, irrespective of when the loan is actually disbursed to F Ltd., and irrespective of the amount of loan actually disbursed to F Ltd.

6. How to Determine Value of Supply of Goods Made or Received Through an Agent [Rule 29]

Rule 29 provides for supplies of goods between principal and his agent. This rule does not have any application in the case of supply of services.

Under this rule, value of supply of goods shall be determined as follows –

Provisions Illustrated

• Case 1 – On January 5, 2025, X Ltd. supplies 100 quintals of dried turmeric to Y, its agent in Kanpur for Rs. 8,000 per quintal. On the same day, an independent supplier supplies 101 quintals of dried turmeric to Y at the rate of Rs. 8,500 per quintal. This is the case of supply of goods between principal and agent. Open market value (i.e., Rs. 8,500 per quintal) will be taken as value of taxable supply of goods (this is covered by Situation 1).
• Case 2 – Suppose in Case 1, Y supplies 98 quintals of the same quality of dried turmeric to his unrelated customers on the same day for Rs. 9,100 per quintal. The point for consideration is whether this information can alter the aforesaid valuation. X Ltd. has an option. Value of supply of goods by X Ltd. to Y may be taken as 90 per cent of price charged by the recipient Y from his unrelated customers. Consequently, Rs. 8,190 (being 90 per cent of Rs. 9,100) may be taken as value of taxable supply.

7. How to Determine Value of Supply of Goods/Services Based on Cost [Rule 30]

Rule 30 is applicable if value of supply of goods/services is not determinable under the parameters discussed above. Under this rule, value of supply will be taken as equal to —

• 110 per cent of cost of manufacture or production or cost of acquisition of goods; or
• 110 per cent of cost of acquisition of services.

Cost of production shall consist of material consumed, direct wages and salaries, direct expenses, works overheads, quality control cost, research and development cost, packing cost, administrative overheads relating to production.

8. What is Mode for Determination of Value of Supply Under Rule 31

It is also known as residual method. It is applicable when value cannot be determined under any of the above provisions. In such a case, value of supply of goods/services shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and general provisions of Chapter IV of GST Rules.

In the case of supply of services, the supplier may opt for this rule, ignoring rule 30.

9. How to Determine Value of Certain Supplies Given Under Rule 32

Value of certain supplies given below shall be determined (at the option of the supplier) in the manner specified by rule 32. These rules are given below –

9.1 Service in relation to purchase or sale of foreign currency [Rule 32(2)] – This rule covers value of supply of services in relation to purchase or sale of foreign exchange (including money changing). In such cases, the problem of valuation arises on account of the fact that as per normal trade practice in such services the consideration is inbuilt in the difference between the selling/buying rates and the Reserve Bank of India (RBI) reference rate for that currency at that time.

Option 1 – Actual value – The following valuation rules are applicable –

1. If a currency is exchanged from or to Indian Rupees then the value of taxable service shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the RBI reference rate for that currency. For example, if US $ 1,000 are sold by a customer @ Rs. 65 per US $ and RBI reference rate for US $ is Rs. 65.73, then the taxable value shall be Rs. 730 (1,000 x 0.73).
2. In case RBI reference rate for a currency is not available, value of taxable service shall be 1 per cent of gross amount of Indian rupees provided or received by the person changing money.
3. If a foreign currency is exchanged for another foreign currency, value of taxable service shall be equal to 1 per cent of the lesser of the two amounts the person changing the money would have received by converting one of the two currencies into Indian Rupees on that day at the reference rate provided by RBI.

Option 2 – Deemed value – The following valuation rules are applicable at the option of supplier of services. However, this option shall be exercised for a financial year and it cannot be withdrawn during the remaining part of that financial year –

9.2 Service provided by an air travel agent in relation to booking of air tickets [Rule 32(3)] – The value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be –

1. an amount calculated at the rate of 5 per cent of the basic fare in the case of domestic bookings; and
2. at the rate of 10 per cent of the basic fare in the case of international bookings of passage for travel by air. “Basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airlines.

9.3 Service in relation to life insurance business [Rule 32(4)] – These rules are given below –

9.4 Valuation based on margin – Buying and selling of second hand goods [Rule 32(5)] – Normally GST is charged on the transaction value of the goods. However, in respect of second hand goods, a person dealing in such goods is allowed to pay tax on the margin (e., the difference between the value at which the goods are supplied and the price at which the goods are purchased). If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation [as the goods (having once borne the incidence of GST at the time of original sale) should not be taxed again when these goods re-enter the supply chain as second hand goods].

This scheme is given by rule 32(5). This rule covers the following –

Buying and selling of second hand goods – This rule is applicable if the following conditions are satisfied –

1. Taxable supply is provided by a person who deals in buying and selling of second hand goods (e., used goods as such or after such minor processing which does not change the nature of the goods).
2. No input tax credit has been availed on the purchase of such goods.

Value of taxable supply – If the above conditions are satisfied, the value of supply shall be the difference between the selling price and the purchase price. If selling price is less than purchase price, value of taxable supply is zero.

Goods repossessed from a defaulting borrower – This rule is also applicable when goods are repossessed from a defaulting borrower. The following conditions should be satisfied –

1. Goods are repossessed from a defaulting borrower.
2. Defaulting borrower is not registered under GST.
3. Goods are repossessed for the purpose of recovery of loan or debt.

How to find out purchase value of goods repossessed – If above conditions are satisfied, the purchase value of goods repossessed shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by 5 percentage points for every quarter (or part thereof) between the date of purchase and the date of disposal by the person making such repossession.