The Union Finance Minister Nirmala Sitaraman presided over the 53rd meeting of the GST Council on 22nd June 2024) at New Delhi with Revenue Secretary and CBIC Chairman.
The GST Council recommended amendment of rule 28(2) of CGST Rules retrospectively with effect from 26.10.2023 and issuance of a circular to clarify various issues regarding valuation of services of providing corporate guarantees between related parties. It is inter alia being clarified that valuation under rule 28(2) of CGST Rules would not be applicable in case of export of such services and also where the recipient is eligible for full input tax credit.
Rule 28(2) of the Central Goods and Services Tax (CGST) Rules, 2017, pertains to the valuation of supply of goods or services or both between distinct or related persons, other than through an agent.
“Provided that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services.”
If the recipient of the supply is eligible for full ITC, the value declared in the invoice can be taken as the open market value of the goods or services. This means that in such cases, the invoice value will be accepted for GST purposes without the need for further adjustments or valuations.
This provision simplifies the compliance process when dealing with related party transactions or transactions between distinct persons (such as branches or units of the same entity with different GST registrations) by allowing the invoice value to be used directly, provided the recipient can claim full ITC. The value mentioned in the invoice is accepted for GST valuation purposes, provided the recipient can fully utilize the ITC.
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