Rule 31 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Every valuation ladder in Chapter IV ends here. When open market value, like kind and quality, the 90% option and cost-plus have all failed, Rule 31 supplies a value by principle rather than by formula.
It is short, and it contains a proviso worth more than the rule itself.
Rule 31: where the value cannot be determined under Rules 27 to 30, it shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and of Chapter IV. The proviso: in the case of supply of services, the supplier may opt for this rule, ignoring Rule 30. So a service provider is not forced through a synthetic cost-of-provision computation.
The text
"Rule 31. Residual method for determination of value of supply of goods or services or both.— Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and the provisions of this Chapter: Provided that in the case of supply of services, the supplier may opt for this rule, ignoring rule 30."
What "reasonable means consistent with section 15" imports
The rule is not a licence to pick a number. It anchors the valuation to the principles of s.15, which means the value should approximate what an unrelated party paying money alone would have paid.
Practical bases that satisfy the standard:
- A comparable transaction with a third party, even if not strictly "like kind and quality" — a similar service to a different customer, adjusted for known differences.
- An arm's-length benchmark from transfer pricing documentation, where one exists for the same transaction under the Income-tax Act.
- A recognised industry pricing convention — a per-seat, per-transaction or per-unit rate the market uses.
- A build-up from cost with a documented margin, where the margin is evidenced by the supplier's actual third-party pricing.
- An allocation basis for shared services — headcount, revenue, usage — applied consistently.
What does not satisfy it:
- a round number chosen for convenience;
- a value chosen because it produces a nil or minimal tax;
- an allocation basis changed between periods without reason;
- a figure with no contemporaneous working.
The proviso: why services can skip Rule 30
Cost of provision of a service is frequently unknowable in any rigorous sense. What is the cost of a management service delivered by a head office team that also does other things? Any answer requires an allocation that is itself a judgment.
Forcing that computation, then adding a fixed 10%, produces a number with a false appearance of precision.
The proviso lets the service supplier go straight to Rule 31 and build a value on a basis it can actually defend — a comparable third-party price, an established internal rate, a market benchmark.
Note the asymmetry: only services get this option. A supplier of goods must exhaust Rule 30 first.
Where Rule 31 is actually used
- Intra-group service charges where the receiving entity cannot take full credit, so Rule 28's second proviso is unavailable and no market comparable exists.
- Non-monetary consideration with no ascertainable money equivalent — Rule 27(d).
- Bespoke or one-off supplies with nothing comparable, in-house or in the market.
- Bundled arrangements where a price must be allocated between elements that are separately supplied.
- Reconstructed transactions identified in audit where the original consideration is unascertainable.
Rule 31A: what Rule 31 does not cover
Rule 31A carves out specified actionable claims from the residual method and prescribes its own valuation for lottery, betting, gambling and horse racing:
- lottery — the higher of 100/128 of the face value of the ticket or the price notified by the organising State;
- betting, gambling or horse racing in a race club — 100% of the face value of the bet or the amount paid into the totalisator.
Rule 31B and Rule 31C do the same for online money gaming and casinos respectively. None of these is reached through Rule 31; they apply directly. Actionable claims under GST →
Practical notes
- Write the basis down before filing, not after a notice. Rule 31 is defended by its working paper.
- Be consistent. The same transaction should be valued the same way each period, and a change should have a stated reason.
- Cross-check against transfer pricing. Where a value is used for income-tax arm's-length purposes, a materially different GST value invites both departments to ask why.
- Document why Rules 27 to 30 failed. Rule 31 applies only if they did, and an officer will start there.
- For services, record the election to use the proviso and skip Rule 30.
Key takeaways
- Rule 31 applies only where Rules 27 to 30 cannot determine the value.
- The standard is reasonable means consistent with the principles of s.15.
- The proviso lets a supplier of services ignore Rule 30 and come straight to Rule 31.
- Suppliers of goods must exhaust Rule 30 first.
- The valuation is defended by its contemporaneous working paper, not by the conclusion.
- Rules 31A, 31B and 31C apply directly to specified actionable claims and are not reached through Rule 31.
Read next
- Rule 30: Cost Plus Ten Per Cent
- Actionable Claims Under GST
- Cross Charge Between Distinct Persons
- Valuation Rules 27 to 35 Explained
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition).