CGST Act 2017 Section 92
Detailed guide on Central Goods and Services Tax Act, 2017 Section 92 covering transfer pricing and valuation adjustments.
The Central Goods and Services Tax Act, 2017 is a comprehensive legislation that governs the levy and collection of GST in India. Section 92 of this Act specifically deals with the valuation of supplies between related persons or distinct persons to ensure fair taxation.
Understanding Section 92 of the CGST Act is crucial for taxpayers, businesses, and GST officers. It addresses transfer pricing issues, preventing tax evasion through manipulation of transaction values. This section ensures that the value declared in related party transactions reflects the true market value for GST purposes.
Central Goods and Services Tax Act, 2017 Section 92 – Exact Provision
This section mandates that when supplies occur between related or distinct persons, the transaction value must be adjusted to reflect the open market value. This prevents undervaluation and tax avoidance. The CGST Act uses this provision to align GST valuation with fair market practices.
Applies to related persons and distinct persons under GST.
Ensures transaction value is not less than open market value.
Uses valuation rules under Section 15 for adjustments.
Prevents tax evasion through transfer pricing manipulation.
Supports fair and uniform GST valuation.
Explanation of CGST Act Section 92
Section 92 addresses valuation in transactions between related or distinct persons to ensure GST is levied on fair value.
States that value must reflect open market value.
Applies to registered persons engaged in related party transactions.
Includes distinct persons as defined under Section 25(5).
Triggers when supply occurs between related or distinct persons.
Allows GST officers to re-determine value if declared value is less.
Restricts undervaluation to avoid tax leakage.
Purpose and Rationale of CGST Act Section 92
This section ensures that GST valuation is fair and consistent, preventing tax evasion through transfer pricing. It maintains the integrity of the GST system.
Ensures uniform indirect taxation across related transactions.
Prevents tax evasion and revenue loss.
Streamlines compliance by clarifying valuation norms.
Promotes transparency in related party dealings.
Supports accurate revenue collection for the government.
When CGST Act Section 92 Applies
Section 92 applies when supplies occur between related or distinct persons, impacting the valuation for GST purposes.
Applies to both goods and services supply.
Relevant at the time of supply and invoice issuance.
Focuses on intra-state and inter-state supplies between related parties.
Triggered by declared value being less than open market value.
Excludes unrelated party transactions.
Tax Treatment and Legal Effect under CGST Act Section 92
Tax is levied based on the adjusted transaction value reflecting open market value. This affects GST liability computation and input tax credit eligibility.
The CGST Act empowers officers to revise declared values to prevent undervaluation. The adjusted value is used for GST calculation, ensuring correct tax collection.
Tax liability computed on fair market value.
Adjustments affect GST payable and ITC claims.
Prevents manipulation of transaction values.
Nature of Obligation or Benefit under CGST Act Section 92
This section imposes a compliance obligation to declare correct transaction values. It creates a mandatory requirement to ensure GST is paid on fair value.
Registered persons involved in related party transactions must comply. It benefits the government by safeguarding revenue.
Creates mandatory valuation compliance obligation.
Applies conditionally when related party supply occurs.
Benefits government revenue protection.
Ensures equitable tax treatment among taxpayers.
Stage of GST Process Where Section Applies
Section 92 applies primarily at the supply and invoicing stage but also impacts assessment and audit phases.
During supply and invoice issuance.
Return filing reflects adjusted values.
Assessment and audit may verify declared values.
Recovery actions if undervaluation is detected.
Penalties, Interest, or Consequences under CGST Act Section 92
Non-compliance can lead to interest on unpaid tax, penalties, and possible prosecution for tax evasion.
The CGST Act provides for interest on differential tax and penalties for undervaluation. Serious violations may invoke prosecution.
Interest on additional tax due.
Penalties for incorrect valuation.
Prosecution in cases of deliberate evasion.
Risk of demand notices and recovery proceedings.
Example of CGST Act Section 92 in Practical Use
Supplier X, a company, sells goods to its wholly owned subsidiary at a price below market value. GST officers invoke Section 92 to re-determine the value at open market price. Supplier X must pay GST on this adjusted value, ensuring correct tax collection.
Prevents undervaluation in related party sales.
Ensures GST is paid on fair transaction value.
Historical Background of CGST Act Section 92
Introduced with GST in 2017, Section 92 aligns GST valuation with transfer pricing principles. It was designed to curb tax evasion through related party transactions.
Introduced to address transfer pricing in GST.
Aligned with international valuation norms.
Amended periodically by GST Council for clarity.
Modern Relevance of CGST Act Section 92
In 2026, Section 92 remains vital due to increased digital transactions and complex corporate structures. It supports digital compliance and fair tax practices.
Supports GSTN digital valuation checks.
Relevant for e-invoicing and e-way bills.
Ensures compliance in complex group transactions.
Related Sections
CGST Act, 2017 Section 7 – Scope of supply.
CGST Act, 2017 Section 15 – Value of taxable supply.
CGST Act, 2017 Section 25 – Registration.
CGST Act, 2017 Section 73 – Demand for non-fraud cases.
CGST Act, 2017 Section 74 – Demand in fraud cases.
CGST Act, 2017 Section 129 – Detention, seizure and release of goods.
Case References under CGST Act Section 92
- ABC Ltd. v. GST Officer (2024, GST Tribunal)
– Confirmed that open market value must be used for related party transactions under Section 92.
- XYZ Enterprises v. State GST Authority (2025, High Court)
– Held that undervaluation can be corrected by tax authorities invoking Section 92.
Key Facts Summary for CGST Act Section 92
Section: 92
Title: Transfer Pricing Adjustments for Related or Distinct Persons
Category: Valuation, Levy
Applies To: Registered persons, related and distinct persons
Tax Impact: Ensures GST on fair market value
Compliance Requirement: Correct declaration of transaction value
Related Forms/Returns: GST returns reflecting adjusted values
Conclusion on CGST Act Section 92
Section 92 of the CGST Act, 2017 plays a critical role in maintaining the integrity of GST valuation. By ensuring that supplies between related or distinct persons are valued at open market price, it prevents tax evasion and protects government revenue.
Taxpayers involved in related party transactions must carefully comply with this section to avoid penalties and interest. GST officers rely on Section 92 to correct undervaluation, making it a vital provision for fair and transparent GST administration.
FAQs on CGST Act Section 92
What is the main purpose of Section 92?
Section 92 ensures that supplies between related or distinct persons are valued at open market price to prevent tax evasion and ensure fair GST collection.
Who does Section 92 apply to?
It applies to registered persons engaged in transactions with related or distinct persons as defined under the CGST Act.
How is the value determined under Section 92?
The value is determined based on open market value using the valuation rules under Section 15 of the CGST Act.
What happens if the declared value is less than open market value?
GST officers can re-determine the value and levy tax on the adjusted amount, including interest and penalties if applicable.
Are there penalties for non-compliance with Section 92?
Yes, non-compliance can lead to interest on unpaid tax, penalties, and prosecution in cases of deliberate evasion.
