Valuation of Supply under GST (2026): Section 15, Transaction Value and Discounts
CA Meet Dhrangadhariya 
April 15, 2026
CA Meet Dhrangadhariya April 15, 2026
Table of Contents
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Last updated: 22 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
How much GST is charged on a supply depends on getting one number right first: the value of that supply. Get the valuation wrong - by leaving out something that should be added, or including a discount that does not qualify - and every GST figure that follows is wrong too.
New to terms such as “transaction value” or “related persons”? See the technical terms explained in simple words further down.
Under section 15(1) of the CGST Act, 2017 (Value of Taxable Supply), the value of a supply is its transaction value - the price actually paid or payable for it - but only where two conditions both hold:
If either condition fails - say, a sale between group companies, or a deal bundled with some other non-cash benefit - the stated price cannot simply be taken at face value, and the valuation moves to the rules discussed further down.
Section 15(2) lists specific items that are always added to the taxable value, even if they are not part of the headline price:
Example: A manufacturer sells machinery for Rs 5,00,000, separately charges Rs 15,000 for packing and transport, and offers 2% interest if payment is delayed beyond 30 days. The packing and transport charge is added under clause (c); any interest actually charged for a delay is added under clause (d). Both become part of the value on which GST is calculated - they are not separate, GST-free charges.
A discount given before or at the time of supply is excluded from the taxable value automatically, with only one condition: it must be recorded in the invoice for that supply. No further paperwork is needed.
A discount given after the supply has already happened is a stricter case. It is excluded only if:
If the recipient does not reverse the matching credit, the post-supply discount cannot be excluded from the supplier’s taxable value - which is why post-supply discount schemes (year-end rebates, volume-linked discounts, and similar) need careful documentation on both sides of the transaction, not just a credit note from the seller.
A pending change to watch: the Finance Act, 2026 (enacted 30 March 2026) has amended this exact discount provision in section 15(3)(b), but the amendment is not yet notified into force as of this post. Until it is notified, the current rule above - credit note plus matching credit reversal by the recipient - still applies in practice. Check for the notification date before relying on any changed treatment.
Section 15’s Explanation defines related persons broadly - the test is not limited to family. Two persons are related if:
A sale between related persons is not automatically disallowed or penalised - it simply cannot be valued at a stated price alone. The valuation has to be worked out under the CGST Rules’ specific methods instead.
Under section 15(4), where the value cannot be determined under section 15(1) - most commonly because the parties are related, or the consideration is not wholly in money - the value is determined in the manner prescribed by the CGST Rules, not simply assumed from the invoice. Broadly, these rules look (in order of preference, depending on the exact rule) at the open market value of an identical or similar supply, or fall back to cost-based or residual methods where no comparable value exists. Section 15(5) also lets the Government, on the GST Council’s recommendation, prescribe a special valuation method for specific categories of supply it notifies.
Valuation questions come up constantly in practice - whether a discount qualifies for exclusion, whether a related-party transaction needs a different valuation method, or whether a reimbursed cost should have been added to the taxable value in the first place. Please reach out to our team and we will be happy to assist with transaction structuring, discount documentation, and related-party valuation under GST.
| Term | What it means |
|---|---|
| Transaction value | The price actually paid or payable for a supply, used as its GST value when the parties are unrelated and price is the only thing changing hands. |
| Related persons | Parties connected by specific relationships the GST law defines - officers/directors of each other, business partners, employer-employee, common control, family, and similar - whose transactions need a different valuation approach. |
| Credit note | A document a supplier issues to reduce the value of an earlier invoice, for example for a post-supply discount or a return of goods. |
| Input tax credit reversal | Giving back, in the buyer’s GST return, a part of the input tax credit originally claimed, because the underlying purchase value has since reduced (for example, because of a discount). |
| Consideration | Anything of value - money or otherwise - given or promised in return for a supply. |
| Open market value | The full value a supply would fetch between unrelated parties dealing at arm’s length, used as a benchmark when the stated price cannot be relied on for valuation. |
The “transaction value” - the price actually paid or payable for the supply - but only where the supplier and the recipient are not related persons and the price is the sole consideration for the supply.
Under section 15(2): any other tax, duty, cess or fee charged separately (apart from GST itself), any cost the supplier should have borne but which the buyer actually paid, incidental charges such as packing and commission, interest, late fee or penalty for delayed payment, and subsidies directly linked to the price - except subsidies given by the Central or State Government.
A discount given before or at the time of supply is excluded automatically, as long as it is recorded in the invoice for that supply. A discount given after the supply is excluded only if the supplier issues a credit note for it and the buyer reverses the matching input tax credit, as required under section 34.
Officers or directors of each other’s businesses, legally recognised business partners, an employer and employee, anyone who owns or controls 25 percent or more of both businesses’ voting stock, one business controlling the other (directly or indirectly), both controlled by the same third party, both jointly controlling a third party, members of the same family, and a sole agent, sole distributor or sole concessionaire of the other party.
Section 15(4) sends the valuation to the methods prescribed in the CGST Rules instead of relying on the stated price - these rules look at comparable open-market value, the value of similar supplies, or cost-based methods, depending on the situation.
Yes - the Finance Act, 2026 (enacted 30 March 2026) amended the discount provision in section 15(3)(b), but as of this post that amendment is not yet notified into force, so the earlier wording (credit note plus matching input tax credit reversal) still applies in practice.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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