Direct answer: Under CGST Rule 27, a supply paid partly through money and partly through goods or services follows a valuation hierarchy. Start with open market value. Only when that is unavailable move to money plus a known equivalent of the non-cash consideration, then like-kind-and-quality value and the prescribed fallback. The cash balance alone is not automatically the taxable value.
Checked on 23 October 2026 against the CGST Rules in ICAI’s April 2026 bare-law compilation, Rules 27, 30 and 31. This guide concerns non-monetary consideration in exchanges and barter. Related-party supplies, principal-agent transactions and specially prescribed valuation mechanisms require their own applicable-rule review rather than automatic use of this working.
Identify both supplies and the actual bargain
Read the order, exchange terms, invoice and goods-receipt evidence together. An old asset surrendered by the customer can be consideration for a new supply; it is not necessarily a cash discount. Record what is supplied in each direction and which party makes it in the course of business.
Valuing the new supply does not establish whether the customer’s disposal is itself a taxable supply, whether the dealer receives input tax credit, or whether a later resale qualifies for a second-hand margin method. Review those questions separately. A private consumer’s old article and a registered business’s capital asset should not be assumed to have identical GST consequences.
Follow the sequence instead of selecting a convenient number
| Step | Valuation basis | Evidence needed |
|---|---|---|
| Rule 27(a) | Open market value of the supply | Reliable tax-exclusive comparable at the relevant time. |
| Rule 27(b) | Money plus the known money equivalent of non-money consideration | Exchange terms and a contemporaneously supported equivalent. |
| Rule 27(c)/(d) | Like kind and quality, then the statutory Rule 30/31 fallback | Why earlier methods fail and evidence for the next method. |
When an open-market value is available, do not ignore it merely because the contract assigns a smaller amount to the traded-in item. Conversely, a marketing list price is not automatically a reliable open-market value. Check commercial terms, quantity, quality, timing and what is included in the quoted price.
The Rule 27(b) money-equivalent amount must be known at the time of supply. A later resale profit on the old item does not by itself rewrite that contemporaneous amount. If the necessary values are unavailable, document the missing evidence before moving further down the hierarchy.
Keep the fallback complete
Rule 27(d) retains the money component and adds the non-money equivalent determined through Rule 30 or Rule 31, in that order. Do not mechanically discard the known cash component or value only the article received in exchange. Rule 30 generally uses 110% of the relevant cost; Rule 31 is a residual reasonable-means approach consistent with section 15 and the valuation chapter. The service-supplier option in Rule 31 also requires separate attention where relevant.
A cost or residual working must identify exactly what is being measured and how it feeds the Rule 27 total. Avoid a blanket formula that applies 110% to a number labelled cost without determining the supply and the required valuation stage. The examples below use the earlier supported methods, keeping uncertain fallback inputs out of the numerical answer.
Separate value, tax and cash settlement
All comparable amounts in the illustrations are tax-exclusive. A tax-inclusive price needs a separate supported tax-extraction working with the actual applicable rate. Rule 27 does not itself decide the product’s GST rate, place of supply, invoice timing or whether another special rule overrides the general route.
Build a settlement bridge showing new-supply value, money consideration and non-money consideration. Bank receipts reconcile only the money part. A short cash collection is not necessarily an invoice shortfall where the exchange asset has genuinely supplied the balance.
These six examples concern fictional goods or services with a documented Rule 27 conclusion. They compute value only, not actual GST or any customer-disposal liability. The stated open-market or like-kind value is assumed to be properly substantiated, not merely copied from a catalogue.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: Open market value controls a machine exchange
A machine has verified open market value of ₹1,20,000. The supplier accepts ₹95,000 cash and an old machine as consideration. Rule 27(a) values the new supply at ₹1,20,000; the settlement difference is ₹25,000. Charging only the ₹95,000 cash as supply value would omit ₹25,000 on these assumptions.
Illustrative example 2: Use a known non-money equivalent when open market value is unavailable
There is no reliable open market value for the contracted custom equipment. The bargain includes ₹60,000 money and a supplied component with a supported ₹18,000 equivalent known at the time of supply. Rule 27(b) value is ₹78,000. The component is not ignored merely because it is recorded outside the bank ledger.
Illustrative example 3: Like-kind value is the next supported stage
Open market value and a known contemporaneous equivalent of the non-cash consideration are unavailable. A properly supported like-kind-and-quality value for the supply is ₹90,000. With ₹55,000 cash collected, Rule 27(c) still values the supply at ₹90,000 on these facts. The ₹35,000 reconciliation gap requires exchange evidence; it is not a new independent tax rate or an automatic discount.
Illustrative example 4: A purely non-monetary exchange can still have a value
A business supplies design services in return for equipment, with no cash. Assume Rule 27 governs and a reliable open market value of the design supply is ₹50,000. Value is ₹50,000 rather than nil. The value exceeds money received by ₹50,000; the separate equipment supply requires its own supplier-level review.
Illustrative example 5: A later resale does not replace the known exchange equivalent
Open market value of a custom supply is unavailable. At supply, the agreed money is ₹80,000 and the supported known money equivalent of the exchanged asset is ₹20,000, so Rule 27(b) value is ₹1,00,000. The supplier later resells the old asset for ₹26,000. The ₹6,000 difference does not by itself change the original ₹1,00,000 value to ₹1,06,000.
Illustrative example 6: Reconcile quantities instead of copying a single-unit cash price
Ten identical new units each have supported open market value of ₹12,000. The customer pays ₹9,000 cash per unit and surrenders ten old units. Total new-supply value is ₹1,20,000; cash is ₹90,000 and the settlement bridge is ₹30,000. Omitting the exchanged units would understate the new-supply value by ₹30,000.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Identify the supply and non-money consideration. | Contract, exchange offer and goods/service evidence. |
| 2 | Check whether Rule 27 is the governing route. | Related-party, agent and special-valuation review. |
| 3 | Separate both parties’ supplies for their own GST analysis. | Supplier/recipient and business-use fact sheet. |
| 4 | Test availability of a reliable open market value. | Comparable transaction and commercial-term evidence. |
| 5 | If unavailable, establish the known non-money equivalent at supply. | Contemporaneous exchange agreement and valuation support. |
| 6 | Where necessary, establish like kind and quality. | Product/service comparison and terms. |
| 7 | Document any Rule 27(d) fallback and its complete total. | Missing-evidence analysis and Rule 30/31 working. |
| 8 | Keep value tax-exclusive before the separate tax calculation. | Price breakup and applicable-rate support. |
| 9 | Reconcile quantity, cash and exchange records. | Invoice, bank, stock and settlement bridge. |
| 10 | Review subsequent adjustments on their actual legal basis. | Credit/debit documents and resale records kept distinct. |
Sixteen practitioner FAQs
1. Does an exchange offer always reduce taxable value to cash paid?
No. Apply the Rule 27 hierarchy to the actual consideration.
2. Is an old article necessarily a cash discount?
No. It can form non-money consideration for the new supply.
3. Which method comes first?
Rule 27 starts with the open market value of the supply.
4. Can the supplier skip available open market value for a lower bargain value?
The hierarchy does not provide that general choice. Establish the proper applicable method.
5. What if open market value is unavailable?
Consider money plus the known equivalent of non-money consideration at the time of supply.
6. What if that equivalent was not known at supply?
Document that limitation and consider the next prescribed stage rather than inventing a contemporaneous amount.
7. What follows the money-equivalent stage?
Rule 27(c) uses goods or services of like kind and quality where the earlier methods cannot determine value.
8. Does Rule 27(d) ignore known money consideration?
No. Its total retains money and adds the non-money equivalent determined under the prescribed fallback.
9. Is any catalogue price automatically open market value?
No. Confirm it is a reliable comparable with the relevant commercial facts.
10. Can barter have nil value because no money changes hands?
No automatic nil value follows. Value the actual supply under the governing rule.
11. Does later resale profit automatically revise the original value?
Not merely because the received article later sells for more. Review original evidence and any actual adjustment separately.
12. Does valuing the new article decide GST on the old one?
No. The customer’s disposal needs its own supplier, business-use and applicable-law analysis.
13. Can the dealer automatically claim ITC on a consumer’s old article?
Do not assume that. Establish the independent credit conditions and supplier documentation.
14. Does this rule determine a GST rate?
No. Product/service rate and exemption analysis are separate from valuation.
15. What should the bank reconciliation show?
The money component only, reconciled with the documented non-money component to the supply value.
16. Can the exchanged article’s later resale automatically use a margin scheme?
No. Assess the independent conditions for that later supply rather than inferring them from the exchange.
Working-paper organisation
Keep the source documents, calculation and final conclusion together for the same entity and period. If using assureTax or other assureOffice tools, use only confirmed available functions and retain this evidence with the output.
Conclusion
Identify the full bargain and preserve evidence for the first available valuation method. Reconcile exchanged goods or services separately from the cash and from later resales.