Transaction Value 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.
Section 15(1) looks permissive: the value of a supply is the transaction value — the price actually paid or payable.
Read to the end of the sub-section and it is conditional:
"...where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply."
Two conditions. Fail either and the transaction value is not available, and s.15(4) sends you to the valuation rules.
Transaction value applies where (i) supplier and recipient are not related as defined in the Explanation to s.15, and (ii) the price is the sole consideration. Fail the first and Rule 28 applies. Fail the second and Rule 27 applies. Note what is not a condition — the price does not have to be reasonable, commercial, or equal to cost. A genuine loss-making sale between unrelated parties for money alone is valued at its price.
Condition one: not related
The Explanation to s.15 defines related persons: officers or directors of one another's businesses, legally recognised partners, employer and employee, a person holding 25% or more of the voting stock of both, one controlling the other, both controlled by a third, together controlling a third, or members of the same family. And persons associated in the business of one another where one is the sole agent, sole distributor or sole concessionaire of the other are deemed to be related.
Where the parties are related, Rule 28 applies — open market value, then like kind and quality, then Rule 30 or 31 — subject to the two provisos, including the full-credit deeming. Supplies to related persons and Rule 28 →
The sole-distributor limb is the one businesses miss. An exclusive distribution agreement can make an otherwise arm's-length counterparty a related person for valuation.
Condition two: price is the sole consideration
"Consideration" under s.2(31) includes payment in money or otherwise and the monetary value of any act or forbearance. So the price is not the sole consideration wherever the supplier receives anything else of value.
Common cases:
- Barter or exchange — goods or services flow back. Barter and non-monetary consideration →
- Free-issue materials supplied by the recipient, where the supplier was contractually obliged to procure them.
- A trade-in accepted against part of the price.
- An obligation of the supplier discharged by the recipient — caught separately by s.15(2)(b).
- A subsidy directly linked to the price paid by a third party — caught by s.15(2)(e), other than Central and State Government subsidies.
Where the price is not the sole consideration, Rule 27 applies: open market value, then money plus the money-equivalent of the non-monetary consideration if known, then like kind and quality, then Rule 30 or 31.
What is not a condition
This is where GST differs sharply from customs valuation intuition.
The price need not be reasonable. A low price between unrelated parties paid wholly in money is the transaction value, however uncommercial it looks.
The price need not cover cost. Selling below cost is not a ground to reject the transaction value.
There is no "undervaluation" power in s.15(1). The proper officer cannot substitute a higher figure merely because the price seems low. The route to a different value is to establish that one of the two conditions fails.
That is a real protection, and it is worth invoking precisely. A notice alleging undervaluation without identifying a relationship or additional consideration has not engaged s.15 at all.
The structure of section 15
| Sub-section | What it does |
|---|---|
| 15(1) | Transaction value, subject to the two conditions |
| 15(2) | Five mandatory inclusions — other taxes, supplier's liability borne by recipient, incidental expenses, delayed-payment interest, subsidies linked to price |
| 15(3) | Discounts excluded — pre-supply recorded in invoice, and post-supply meeting the conditions |
| 15(4) | Where value cannot be determined under 15(1), as prescribed — Rules 27 to 31 |
| 15(5) | Notified supplies valued as prescribed — Rule 32 |
| Explanation | Definitions of related persons |
Note the order. s.15(2) and 15(3) apply even where the transaction value is accepted. They are not fallbacks; they operate on the transaction value itself.
Key takeaways
- Transaction value requires unrelated parties and price as the sole consideration.
- Related parties → Rule 28. Non-monetary consideration → Rule 27.
- The sole distributor or sole agent limb deems parties related.
- A low or below-cost price is not a ground to reject transaction value.
- s.15(2) inclusions and s.15(3) discounts apply on top of the transaction value.
- s.15(5) and Rule 32 override for notified supplies.
Read next
- Section 15 CGST Act: Value of Supply
- Supplies to Related Persons: Schedule I and Rule 28
- Barter and Non-Monetary Consideration Under GST
- Valuation Rules 27 to 35 Explained
Disclaimer: Positions stated as on 5 September 2026, based on ICAI Background Material on GST, Volume I (2026 edition).