GST valuation: what is included, discounts and related-party supplies
2 min read
Updated 03 Oct 2026
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AI summary
What makes up the taxable value under section 15, how discounts reduce it, and how to value supplies to related parties and branches.
8 sections
Key facts
- GST is charged on the transaction value: the price actually paid or payable, when the buyer and seller are not related and price is the only consideration.
- The value includes: other taxes and fees (except GST), amounts the buyer pays on your behalf, incidental expenses like packing, commission and freight charged by you, interest or late fee for delayed payment, and subsidies linked to the price (except government subsidies).
- Discount on the invoice at the time of supply is deducted from the value.
- Post-sale discounts (old rule): a discount given after the sale reduces the value only if it was agreed before or at the time of supply, is linked to specific invoices, and the buyer reverses the ITC.
- Post-sale discounts (Finance Act 2026): sections 15 and 34 are amended so that a GST credit note plus ITC reversal by the buyer is enough, without a prior agreement. These amendments apply from the date the government notifies; confirm the notification is in force for your period before relying on it.
What is in the value
| Item | Part of taxable value? |
|---|---|
| Packing, freight charged on the invoice | Yes |
| Interest or penalty for late payment | Yes |
| Excise duty, entry tax, other non-GST taxes | Yes |
| Government subsidy | No |
| Discount on the invoice | No (deducted) |
| Reimbursement as a pure agent (e.g. registration fee in buyer's name) | No, if pure-agent conditions are met |
Related parties and branches (Rule 28)
- Supplies between related persons (including another GSTIN of the same PAN, a "distinct person") are valued at open market value.
- If the buyer can claim full ITC, the value shown on the invoice is accepted as the open market value. This is why most inter-branch transfers can be invoiced at cost.
- For goods the buyer resells as they are, the supplier may opt for 90% of the price charged by the buyer to unrelated customers.
- Supplies to employees: gifts up to ₹50,000 a year per employee are not a supply.
Common questions
Do I charge GST on late payment interest from a customer?
Yes. Interest or late fee charged for delayed payment is part of the value of the supply. Issue a debit note or invoice for it at the same rate as the main supply.
Is a financial credit note for a discount allowed?
Yes. You can issue a commercial (financial) credit note without reducing GST. Then the buyer does not reverse ITC, and your output tax stays the same.
How do I value free items in a "buy 2 get 1" offer?
It is one supply of three items for the price of two. GST is on the price charged, and ITC on the free item is not reversed.
Sources
- Central Goods and Services Tax Act, 2017 (as amended)
- Central Goods and Services Tax Rules, 2017
- Finance Bill / Finance Act, 2026 (CGST amendments to sections 15, 34, 54 from a notified date)
Law as of October 2026. Verify against the latest notifications before relying on it for filings.
PreviousJob work under GST: section 143 and ITC-04 Next in GST Transactions GST refunds: types, time limit and process
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