Taxation - GST Ch 06: Time Value Of Supply - Test 2: answer key

Question 1 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. M/s Vardhman Textiles Ltd. (VTL), a registered supplier in Surat, Gujarat, supplied cotton fabric to M/s Kapoor Garments Pvt. Ltd. (KGL) in Ludhiana, Punjab, on 10th September 2026. The list price of the goods was ₹15,00,000 (excluding taxes and discounts). VTL received a price-linked subsidy of ₹1,00,000 from the Textile Promotion Council (a non-Government body), which was deducted from the list price to arrive at the invoice price. KGL agreed to pay a municipal tax of ₹25,000 directly to the local authority, which was VTL's liability but not included in the invoice price. VTL charged ₹40,000 for packing and ₹15,000 for weightment charges, both incurred before delivery. A trade discount of 2% was mentioned on the invoice price. Further, VTL offered a post-supply volume discount of ₹30,000 based on an agreement executed at the time of supply, and KGL reversed the proportionate ITC on 25th October 2026. KGL delayed the payment beyond the credit period and paid interest of ₹12,000 on 5th November 2026.

What is the value of the taxable supply considering the subsidy from the Textile Promotion Council, before considering other inclusions and exclusions?

1. ₹14,00,000
2. ₹15,00,000 (correct answer)
3. ₹16,00,000
4. ₹15,50,000

Answer: B — ₹15,00,000

Explanation. The subsidy is received from a non-Government body and is directly linked to the price, hence it is includible in the value of supply under section 15(2)(e). The list price is ₹15,00,000, and the subsidy of ₹1,00,000 was deducted to arrive at the invoice price of ₹14,00,000. To determine the value of supply, the subsidy must be added back to the invoice price. Therefore, the value is ₹14,00,000 + ₹1,00,000 = ₹15,00,000.

Where it goes wrong. Students may consider the invoice price of ₹14,00,000 as the value, ignoring the statutory requirement to add back non-Government subsidies directly linked to the price.

Authority. Section 15(2)(e) of the CGST Act, 2017

Question 2 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · hard

How is the municipal tax of ₹25,000 paid by KGL treated in the value of supply?

1. Included, as it is a payment made by the recipient on behalf of the supplier. (correct answer)
2. Excluded, as it is not charged by the supplier in the invoice.
3. Included, as it is a tax levied under a law other than GST.
4. Excluded, as it is paid directly to the government.

Answer: A — Included, as it is a payment made by the recipient on behalf of the supplier.

Explanation. Section 15(2)(b) mandates the inclusion of any amount that the supplier is liable to pay in relation to the supply but which has been incurred by the recipient of the supply and not included in the price. Since the municipal tax was VTL's liability, and KGL paid it directly to the authority without it being recorded in the invoice, it must be added to the value of supply.

Where it goes wrong. Students may incorrectly apply section 15(2)(a) or assume that because it is not in the invoice, it is excluded. However, payments made by the recipient on behalf of the supplier are explicitly includible.

Authority. Section 15(2)(b) of the CGST Act, 2017

Question 3 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · hard

What is the value of the taxable supply after considering the packing charges, weightment charges, trade discount, and post-supply discount?

1. ₹15,50,000
2. ₹15,22,000 (correct answer)
3. ₹15,28,000
4. ₹15,20,000

Answer: B — ₹15,22,000

Explanation. The value of supply is computed as follows: Base value including subsidy (₹15,00,000) + Municipal tax (₹25,000) + Packing (₹40,000) + Weightment (₹15,000) - Trade discount @ 2% on invoice price of ₹14,00,000 (₹28,000) - Post-supply discount (₹30,000). The post-supply discount is deductible as there is a prior agreement and ITC has been reversed. Total = ₹15,00,000 + ₹25,000 + ₹40,000 + ₹15,000 - ₹28,000 - ₹30,000 = ₹15,22,000.

Where it goes wrong. Students may incorrectly apply the trade discount on the list price instead of the invoice price, or they may fail to deduct the post-supply discount despite the conditions being met.

Authority. Section 15(2)(c) of the CGST Act, 2017; Section 15(3) of the CGST Act, 2017

Question 4 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

What is the time of supply for the interest of ₹12,000 paid by KGL on 5th November 2026?

1. 10th September 2026
2. The due date for filing the return for September 2026
3. 5th November 2026 (correct answer)
4. The date of issue of the invoice

Answer: C — 5th November 2026

Explanation. Section 15(2)(d) includes interest for delayed payment in the value of supply. Section 12(6) specifically provides that the time of supply for an addition in value by way of interest, late fee, or penalty for delayed payment of consideration is the date on which the supplier receives such addition in value. Therefore, the time of supply is 5th November 2026.

Where it goes wrong. Students may incorrectly link the time of supply of interest to the original date of supply or the invoice date, overlooking the specific provision for delayed payment charges.

Authority. Section 12(6) of the CGST Act, 2017

Question 5 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. M/s Apex Engineering Works (AEW), a registered manufacturer in Chennai, Tamil Nadu, sold an industrial machine to M/s Sunrise Constructions (SMC) in Bengaluru, Karnataka, for ₹20,00,000. AEW incurred ₹50,000 as freight and ₹10,000 as transit insurance to deliver the machine to SMC's premises, which was not included in the price. SMC paid ₹30,000 directly to a third-party inspection agency for a mandatory pre-delivery inspection, which was AEW's responsibility as per the contract, but this amount was not recorded in AEW's invoice. AEW offered a cash discount of 1% on the invoice price for payment within 15 days, which SMC availed. However, SMC failed to pay the balance within the due date and paid a penalty of ₹8,000 to AEW on 30th November 2026. AEW also provided a post-supply discount of ₹15,000 to SMC for achieving a target, but there was no prior agreement for this discount, and SMC did not reverse any ITC.

How should the inspection charges of ₹30,000 paid by SMC to the third party be treated?

1. Excluded, as they are paid directly by the recipient.
2. Included, as they are incidental expenses.
3. Excluded, as they are not recorded in the invoice.
4. Included, as they are incurred by the recipient on behalf of the supplier. (correct answer)

Answer: D — Included, as they are incurred by the recipient on behalf of the supplier.

Explanation. The inspection was AEW's responsibility as per the contract, but SMC paid for it directly. Section 15(2)(b) requires the inclusion of any amount that the supplier is liable to pay in relation to the supply but which has been incurred by the recipient. The fact that it was not recorded in the invoice does not exclude it from the value of supply.

Where it goes wrong. Students may exclude the amount because it was paid directly by the recipient to a third party and not charged by the supplier, ignoring the specific inclusion clause under section 15(2)(b).

Authority. Section 15(2)(b) of the CGST Act, 2017

Question 6 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · hard

What is the value of the taxable supply before considering the penalty and post-supply discount?

1. ₹20,90,000
2. ₹20,70,000 (correct answer)
3. ₹20,40,000
4. ₹20,10,000

Answer: B — ₹20,70,000

Explanation. The value of supply is computed as follows: Price (₹20,00,000) + Freight (₹50,000) + Transit insurance (₹10,000) + Inspection charges paid by recipient on behalf of supplier (₹30,000) - Cash discount @ 1% on invoice price (₹20,000). The freight and insurance are included as the supplier agreed to deliver the goods. The cash discount is deductible as it was given at the time of supply and recorded in the invoice. Total = ₹20,00,000 + ₹50,000 + ₹10,000 + ₹30,000 - ₹20,000 = ₹20,70,000.

Where it goes wrong. Students may incorrectly exclude the freight and insurance by treating the supply as ex-factory, or they may fail to deduct the cash discount even though it is recorded in the invoice.

Authority. Section 15(2) of the CGST Act, 2017; Section 15(3)(a) of the CGST Act, 2017

Question 7 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

What is the treatment of the post-supply discount of ₹15,000 given by AEW to SMC?

1. Not deductible, as it lacks a prior agreement and ITC reversal. (correct answer)
2. Deductible, as it is a discount given after supply.
3. Deductible, as it is linked to the supply.
4. Not deductible, as post-supply discounts are never allowed.

Answer: A — Not deductible, as it lacks a prior agreement and ITC reversal.

Explanation. For a post-supply discount to be deductible from the value of supply under section 15(3)(b), two conditions must be satisfied: (i) the discount must be established in terms of an agreement entered into at or before the time of supply and specifically linked to relevant invoices, and (ii) the recipient must reverse the proportionate input tax credit. Since there was no prior agreement and no ITC reversal, the discount is not deductible.

Where it goes wrong. Students may assume all discounts are deductible or may mix up the conditions for pre-supply and post-supply discounts, overlooking the strict requirements for the latter.

Authority. Section 15(3)(b) of the CGST Act, 2017

Question 8 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

What is the total value of the taxable supply including the penalty of ₹8,000?

1. ₹20,70,000
2. ₹20,62,000
3. ₹20,78,000 (correct answer)
4. ₹20,85,000

Answer: C — ₹20,78,000

Explanation. Section 15(2)(d) mandates the inclusion of interest, late fee, or penalty for delayed payment of consideration in the value of supply. The value before penalty is ₹20,70,000. Adding the penalty of ₹8,000 gives a total value of ₹20,78,000.

Where it goes wrong. Students may exclude the penalty as it is not a part of the base price, forgetting that delayed payment charges form part of the value of supply.

Authority. Section 15(2)(d) of the CGST Act, 2017

Question 9 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier received a subsidy of ₹50,000 from the Central Government for supplying goods to a specific class of buyers. The price of the goods is ₹5,00,000. What is the value of supply?

1. ₹5,50,000
2. ₹4,50,000
3. ₹5,25,000
4. ₹5,00,000 (correct answer)

Answer: D — ₹5,00,000

Explanation. Section 15(2)(e) includes subsidies directly linked to the price in the value of supply, but specifically excludes subsidies provided by the Central Government and State Governments. Since the subsidy is from the Central Government, it is not added to the value. The value of supply remains ₹5,00,000.

Where it goes wrong. Students may add the subsidy to the value, overlooking the explicit exclusion for Government subsidies.

Authority. Section 15(2)(e) of the CGST Act, 2017

Question 10 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier provided services for ₹10,00,000. The supplier incurred ₹20,000 on packing and ₹30,000 on installation, which were billed to the recipient. What is the value of supply?

1. ₹10,50,000 (correct answer)
2. ₹10,00,000
3. ₹10,20,000
4. ₹10,30,000

Answer: A — ₹10,50,000

Explanation. Section 15(2)(c) includes incidental expenses, including commission and packing, charged by the supplier to the recipient, and any amount charged for anything done by the supplier in respect of the supply at the time of, or before delivery of goods or supply of services. Both packing and installation charges are includible. Total value = ₹10,00,000 + ₹20,000 + ₹30,000 = ₹10,50,000.

Where it goes wrong. Students may exclude installation charges assuming they are separate services, but they are includible if done before or at the time of supply and billed to the recipient.

Authority. Section 15(2)(c) of the CGST Act, 2017

Question 11 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier received interest of ₹5,900 from a buyer for delayed payment. The interest is inclusive of GST @ 18%. What is the value of the interest to be added to the supply?

1. ₹5,900
2. ₹4,838
3. ₹5,000 (correct answer)
4. ₹5,200

Answer: C — ₹5,000

Explanation. Interest for delayed payment is includible in the value of supply. When the interest amount is inclusive of GST, the value must be computed by making back calculations. Value = ₹5,900 × (100 / 118) = ₹5,000.

Where it goes wrong. Students may simply take the entire amount of ₹5,900 as the value without removing the GST component.

Authority. Section 15(2)(d) of the CGST Act, 2017

Question 12 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier provided a discount of ₹10,000 on an invoice of ₹1,00,000. The discount was given after the supply was effected, but it was established in an agreement before the supply and linked to the invoice. The recipient reversed the ITC. What is the value of supply?

1. ₹1,00,000
2. ₹95,000
3. ₹1,10,000
4. ₹90,000 (correct answer)

Answer: D — ₹90,000

Explanation. A post-supply discount is deductible from the value of supply if it is established in an agreement before the time of supply, linked to relevant invoices, and the recipient reverses the proportionate ITC. Since all conditions are met, the discount is allowed as a deduction. Value = ₹1,00,000 - ₹10,000 = ₹90,000.

Where it goes wrong. Students may incorrectly exclude the discount assuming all post-supply discounts are non-deductible, or they may deduct it without checking the ITC reversal condition.

Authority. Section 15(3)(b) of the CGST Act, 2017

Question 13 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier offered a post-supply discount of ₹5,000. There was a prior agreement, but the recipient did not reverse the ITC. What is the value of supply?

1. The invoice value. (correct answer)
2. ₹5,000 less than the invoice value.
3. The invoice value plus ₹5,000.
4. The invoice value less 50% of the discount.

Answer: A — The invoice value.

Explanation. For a post-supply discount to be deductible, the recipient must reverse the proportionate input tax credit as attributable to the discount. If the recipient does not reverse the ITC, the condition under section 15(3)(b)(ii) is not satisfied, and the discount cannot be deducted. Therefore, the value remains the invoice value.

Where it goes wrong. Students may assume that a prior agreement is sufficient to claim the deduction, ignoring the mandatory condition of ITC reversal by the recipient.

Authority. Section 15(3)(b)(ii) of the CGST Act, 2017

Question 14 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Which of the following is not a condition for deducting post-supply discount from the value of supply?

1. The discount is established in an agreement before the supply.
2. The discount is recorded in the invoice at the time of supply. (correct answer)
3. The discount is specifically linked to relevant invoices.
4. The recipient reverses the proportionate ITC.

Answer: B — The discount is recorded in the invoice at the time of supply.

Explanation. Section 15(3)(b) deals with post-supply discounts, which by definition are given after the supply has been effected. Therefore, recording the discount in the invoice at the time of supply is not a condition; rather, the discount is typically passed on via a credit note. The other options are mandatory conditions.

Where it goes wrong. Students may confuse the conditions for pre-supply discounts (recorded in invoice) with those for post-supply discounts.

Authority. Section 15(3)(b) of the CGST Act, 2017

Question 15 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier collected TCS of ₹5,000 under the Income-tax Act on a supply of ₹10,00,000. Is TCS includible in the value of supply?

1. Yes, as it is a tax.
2. Yes, if charged separately.
3. No, as it is an interim levy. (correct answer)
4. No, as it is an income-tax.

Answer: C — No, as it is an interim levy.

Explanation. The CBIC has clarified that for the purpose of determining the value of supply under GST, tax collected at source (TCS) under the Income-tax Act, 1961 is not includible. This is because TCS is an interim levy and does not have the character of a tax.

Where it goes wrong. Students may assume all taxes are included under section 15(2)(a), overlooking the specific clarification that TCS is excluded.

Authority. Circular No. 76/50/2018 GST dated 31.12.2018

Question 16 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier sold goods for ₹5,00,000 on an ex-factory basis. The buyer paid ₹20,000 as freight directly to the transporter. What is the value of supply?

1. ₹5,20,000
2. ₹4,80,000
3. ₹5,10,000
4. ₹5,00,000 (correct answer)

Answer: D — ₹5,00,000

Explanation. In an ex-factory sale, the supplier's obligation ends at the factory gate, and the buyer bears the cost of transportation. Since the supplier did not incur the freight and it was not charged to the buyer as part of the supply, it is not included in the value of supply. The value remains ₹5,00,000.

Where it goes wrong. Students may add the freight to the value assuming it is a composite supply, ignoring that in an ex-factory contract, the freight is not a part of the supplier's consideration.

Authority. Section 15(1) of the CGST Act, 2017

Question 17 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier received a subsidy of ₹20,000 from an NGO, directly linked to the price of goods worth ₹1,00,000. What is the value of supply?

1. ₹1,20,000 (correct answer)
2. ₹1,00,000
3. ₹80,000
4. ₹1,10,000

Answer: A — ₹1,20,000

Explanation. Section 15(2)(e) includes subsidies directly linked to the price in the value of supply, except those provided by the Central or State Government. Since the subsidy is from an NGO and is directly linked to the price, it is includible. Value = ₹1,00,000 + ₹20,000 = ₹1,20,000.

Where it goes wrong. Students may exclude the subsidy assuming all subsidies are exempt, or they may not check if it is directly linked to the price.

Authority. Section 15(2)(e) of the CGST Act, 2017

Question 18 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier offered a post-supply discount based on an agreement, but the discount could not be linked to specific invoices. What is the treatment?

1. Deductible, as there is an agreement.
2. Not deductible, as it cannot be linked to invoices. (correct answer)
3. Deductible, if ITC is reversed.
4. Deductible at 50%.

Answer: B — Not deductible, as it cannot be linked to invoices.

Explanation. For a post-supply discount to be deductible, section 15(3)(b)(i) requires that the discount is established in terms of an agreement and is specifically linked to relevant invoices. If it cannot be linked to specific invoices, the condition is not met, and the discount is not deductible.

Where it goes wrong. Students may focus only on the existence of a prior agreement and ignore the mandatory condition of linking the discount to specific invoices.

Authority. Section 15(3)(b)(i) of the CGST Act, 2017

Question 19 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier exchanged goods worth ₹50,000 for services worth ₹50,000 without any monetary consideration. What is the value of supply?

1. Nil, as no money is involved.
2. ₹25,000.
3. Value determined as per the CGST Rules. (correct answer)
4. It cannot be determined.

Answer: C — Value determined as per the CGST Rules.

Explanation. Section 15(1) applies only where price is the sole consideration for the supply. In a barter transaction where goods are exchanged for services without monetary consideration, price is not the sole consideration. Under section 15(4), the value of such supply is determined in the manner prescribed under the CGST Rules (Chapter IV).

Where it goes wrong. Students may assume the value is nil because there is no money, or they may use the transaction value without realizing section 15(1) does not apply to barter transactions.

Authority. Section 15(4) of the CGST Act, 2017

Question 20 · 2 marks · Taxation - GST Ch 06: Time Value Of Supply · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A supplier gives a cash discount of 2% at the time of supply, which is recorded in the invoice. The invoice value is ₹2,00,000. What is the value of supply?

1. ₹2,00,000
2. ₹2,04,000
3. ₹1,98,000
4. ₹1,96,000 (correct answer)

Answer: D — ₹1,96,000

Explanation. Section 15(3)(a) excludes discounts given before or at the time of supply if such discount has been duly recorded in the invoice. The cash discount of 2% on ₹2,00,000 is ₹4,000. Value = ₹2,00,000 - ₹4,000 = ₹1,96,000.

Where it goes wrong. Students may incorrectly add the discount to the value or ignore it altogether, failing to apply the exclusion provision for discounts recorded in the invoice.

Authority. Section 15(3)(a) of the CGST Act, 2017