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Rule 28 — second proviso: where the recipient is eligible for FULL input tax credit, the value declared in the invoice shall be deemed to be:
A110% of cost
BOpen market value
CCost plus a notional margin
DRule 31 residual
Answer & Solution
Correct answer: B. Open market value
1. The second proviso to Rule 28 — when the recipient is eligible for full ITC on the related-party supply, any value declared in the invoice is DEEMED to be open market value.
2. This recognises the revenue-neutrality of fully-creditable inter-related-party supplies.
3. If recipient cannot claim full ITC (e.g. exempt-supply business), Rule 28(a)/(b)/(c) applies.
_Source: ICAI BoS CA Final Paper 8, Ch 5 "Value of Supply", §Rule 28 proviso 2_
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