Indirect Tax Laws (GST & Customs)MCQQuestion 5839 of 504
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Alpha Ltd., a registered person in Maharashtra, supplies goods to its distinct person Beta Ltd. in Gujarat without consideration. Beta Ltd. is eligible for full Input Tax Credit (ITC). The open market value of the goods is ₹5,00,000, and the cost of production is ₹4,00,000. Alpha Ltd. declares a value of ₹3,50,000 in the tax invoice. What is the value of supply under Rule 28 of the CGST Rules, 2017?

Select Your Answer (Keyboard: A, B, C, D)
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Correct Answer

✅ Option C — ₹3,50,000 (Value declared in the invoice as recipient is eligible for full ITC)

All Options:

  • A₹5,00,000 (Open Market Value)
  • B₹4,40,000 (110% of cost of production under Rule 30)
  • C₹3,50,000 (Value declared in the invoice as recipient is eligible for full ITC) ✓
  • DNil, since supply between distinct persons without consideration cannot be valued

Detailed Solution & Explanation

Under Rule 28 of the CGST Rules, 2017:
1. Value of supply between distinct persons under Section 25(4) is normally the Open Market Value.
2. However, the **second proviso to Rule 28** specifically provides that:
If recipient is eligible for full ITC  ⟹  Invoice Value=Deemed Open Market ValueIf recipient is eligible for full ITC\displaystyle \text{If recipient is eligible for full ITC} \implies \displaystyle \text{Invoice Value} = \text{Deemed Open Market Value}
3. Since Beta Ltd. is eligible for full input tax credit, the invoice value of ₹3,50,000\displaystyle ₹3,50,000 declared by Alpha Ltd. is accepted as the statutory value of supply.
Hence, **Option C** is the correct answer.

Key Concepts to Understand

Consideration

Something of value exchanged for a promise. 'Quid Pro Quo' (Something for something).

Supply

Total amount of a good available to consumers.

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