Value of supply [section 2(46)]

[(46) ―value of supply‖ means: —

• in respect of a taxable supply, the consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but excluding the amount of tax:

Provided that –

• in case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the open market price of the supply excluding the amount of tax;
• in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax; and
• in case a taxable supply is made to a consumer from general public on installment basis on a price inclusive of mark up or surcharge rendering it higher than open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax.]
• in case of trade discounts, the discounted price excluding the amount of tax; provided the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices;
• in case where for any special nature of transaction it is difficult to ascertain the value of a supply, the open market price;
• in case of imported goods, the value determined under section 25 of the Customs Act, including the amount of customs-duties and central excise duty levied thereon;
• in case where there is sufficient reason to believe that the value of a supply has not been correctly declared in the invoice, the value determined by the Valuation Committee comprising representatives of trade and the Inland Revenue constituted by the Commissioner; and
• in case the goods other than taxable goods are supplied to a registered person for processing, the value of supply of such processed goods shall mean the price excluding the amount of sales tax which such goods will fetch on sale in the market:
• in case of a taxable supply, with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him, or such other price as the Board may, by a notification in the official Gazette, specify.]

Explanations:

VALUE OF A TAXABLE SUPPLY:

The consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but excluding the amount of sales tax.

VALUE BY FBR:

The FBR has power to fix the value of any imported goods or taxable supplies. However, if the import or supply is made at a value higher than the value fixed by the FBR then the actual value shall be considered.

TRADED DISCOUNTS:

Trade discount shall be excluded provided that;

1. the tax invoice shows the discounted price and the related tax and
2. the discount allowed is in conformity with the normal business practices;

Cases in which the value of supply shall be a different amount;

• NORMAL CASE

The consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives in respect of supply but excluding the amount of sales tax. And Mark up on credit sales shall not be taken into value of supply – clause 5 of General Order 3 of 2004.

• CONSIDERATION IS FULLY OR PARTLY IN KIND:

Open market price of the supply excluding the amount of tax;

• TAXABLE SUPPLY IS MADE TO A CONSUMER FROM GENERAL PUBLIC ON INSTALLMENT BASIS ON A PRICE INCLUSIVE OF MARK UP OR SURCHARGE RENDERING IT HIGHER THAN OPEN MARKET PRICE,

The value of supply shall mean the open market price of the supply excluding the amount of tax.

• SUPPLY BETWEEN ASSOCIATED PERSONS:

The value of supply shall be as in normal case or open market price of the supply excluding the amount of tax.

• IMPORTED GOODS:

The value determined under section 25 of the Customs Act, including the amount of customs-duties and excise duty levied thereon;

 Note: FED is applicable on value + custom duty

Example: the value of raw material importer is Rs. 1,000, custom duty 20%, FED 10%, Sales Tax 17% and advance income tax is 5.5%. The amount of sales tax in this case would be:

value of raw material imported                               Rs, 1,000

add: Custom Duty                (@ 20%)                      Rs.    200

Rs. 1,200

Add: FED                   (Rs. 120)                                 Rs. 1,320

Sales Tax                 (Rs. 1,320 x 17%)                  Rs.      224

Advance Income Tax [5.5% x (1,320+224)]           Rs.      85

• IF THERE IS SUFFICIENT REASON TO BELIEVE THAT THE VALUE OF A SUPPLY HAS NOT BEEN CORRECTLY DECLARED IN THE INVOICE.

The value determined by the Valuation Committee comprising representatives of trade and the Inland Revenue constituted by the Commissioner.

• EXEMPT GOODS ARE SUPPLIED TO A REGISTERED PERSON FOR PROCESSING:

The price excluding the amount of sales tax [which such goods will fetch on sale in the market].

• SPECIAL NATURE OF TRANSACTION IT IS DIFFICULT TO ASCERTAIN THE VALUE OF A SUPPLY

The open market price