Transaction Reporting for related parties and non-related parties in GST Audit :
Valuation is an important aspect of the GST Audit. Valuation determines what value the taxes are being paid. In case of if the buyer and seller are not related, then the transaction value is to be considered for the valuation purpose basis on provisions of Section 15 of the CGST Act.
Similarly, in case of related parties, then the valuation is to be the determined basis of provisions of Rule 28, 30 & 31.
In related party transactions the valuation has to be done in the following manner / sequence
i. the open market value,
ii. if not available for any goods or services, then the price of similar good or services with similar quality and quantity
iii. if not then cost plus 10%
iv. if not available then residual method, it shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and the provisions of this Chapter
In case of transactions between the distinct parties, valuation can be done at the 90% of the open market value if the said goods being transferred for further supply and ITC is being availed.
There is a difference between the related party and distinct person in GST, as a result there is a difference in the valuation process also, the verification in such cases had to be done carefully and qualified accordingly.
All transactions related to related party transactions have to be verified basis on the above said provisions and if they are not as per the provisions, the same reported in the audit report and record it in the audit observations and findings documents.