GST Valuation Rules: An Interactive Guide for Related Party Transactions
A clear, practical guide to navigating arm’s length pricing, distinct person transactions, and statutory rule hierarchies under Indian Goods and Services Tax laws.
The GST Valuation Rule Hierarchy
When standard transaction value cannot be accepted under Section 15(4), GST rules establish a mandatory sequential valuation process.
Start: Related Party Transaction
Applies to supplies between related parties or distinct persons (e.g. cross-state branch transfers) where price is not sole consideration.
Rule 28: Primary Valuation Method
Must attempt valuation in the following priority order:
- Open Market Value (OMV): Price charged to unrelated buyers under normal trade.
- Like Kind & Quality: Value of identical or similar goods/services.
- 90% Resale Option: If recipient resells goods as such, value can be 90% of recipient's selling price to end customers.
Rule 30: Cost-Based Value
The taxable value shall be 110% of the cost of production/manufacture, or cost of acquisition of goods, or cost of provision of services.
Rule 31: Residual Method (Best Judgment)
Determination using reasonable commercial principles consistent with Section 15.
Note: For services, taxpayers have the flexibility to apply Rule 31 directly, skipping Rule 30.
Valuation Rule Finder
Select your transaction conditions below to quickly find which rule applies.
Practical Scenarios & Key Exceptions
Full ITC Eligibility
If recipient has 100% ITC eligibility, any invoice amount declared is legally deemed as Open Market Value (revenue neutral).
Supply to Employee
Gifts up to ₹50,000 per financial year from employer to employee are exempt. Contractual perquisites are outside GST.
Supply via Agent
Governed by Rule 29: Open Market Value or, at supplier's option, 90% of price charged by agent to unrelated buyers.
