Direct answer: CGST Rule 30 values a supply at 110% of the relevant cost only when the preceding valuation rules do not determine its value. It is a fallback, not a minimum selling price for every business transaction. For services, Rule 31 expressly permits the supplier to choose its reasonable-means route while bypassing Rule 30. The cost base, valuation route and arithmetic each need separate support.
Checked on 23 October 2026 against the actual section 15 and Rules 27–31 reproduced in ICAI’s April 2026 GST Act(s) and Rule(s), Bare Law, updated through 31 March 2026. This article addresses the Rule 30 cost working and Rule 31 service option. It does not select a GST classification or tax rate, replace a special notified valuation method, or decide the treatment of every related-party or cross-charge arrangement.
Explain why a cost method has been reached
Section 15(1) starts with transaction value where the supplier and recipient are unrelated and price is the sole consideration, subject to the statutory valuation framework. A sale below cost is not, merely for that reason, revalued to cost plus 10%. Where the facts call for the Chapter IV rules, identify the relevant rule and complete its preceding tests or applicable options. Retain evidence explaining why a higher-priority valuation basis does not determine the value.
Rules dealing with non-monetary consideration, related/distinct persons or principal-agent goods have their own sequence and qualifications. Rule 30 cannot be used to sidestep an available controlling valuation rule because the cost result is lower. Equally, do not assume that an uncharged movement is automatically a taxable supply: establish the supply first, then its valuation.
Choose the cost base that corresponds to the actual supply
| Supply being valued | Rule 30 cost description | Working-paper question |
|---|---|---|
| Produced or manufactured goods | Cost of production or manufacture | What costs belong to the supplied output? |
| Acquired goods | Cost of acquisition | Which supported acquisition costs relate to those goods? |
| Services | Cost of provision | Which personnel, subcontract and other costs belong to that service? |
Build a reproducible bridge from the ledger or cost records to the supplied quantity and period. Record direct items, common-cost pools, allocation drivers, quantities and any exclusions. A company-wide expense total is not automatically the cost of one shipment. If a factory cost pool supports several products, an allocation should explain why its driver is appropriate. A mathematical allocation is not proof that the underlying cost category belongs in the base.
The Rule 30 text does not itself declare every cost certificate, particular ERP report or CAS-4 format universally mandatory. Use the applicable legal and costing requirements for the actual case and preserve a supportable method. All included cost components in the illustrations are expressly assumed to have been validated as relevant costs. The examples demonstrate valuation arithmetic, not a ruling that every similarly named ledger must always be included or excluded.
Cost plus 10% differs from a 10% selling-price margin
For an established cost C, Rule 30 value is C × 1.10. The 10% increment is calculated on cost, not on the resulting value. Dividing cost by 90% instead targets a 10% margin on selling price and produces a different figure. Do not add a second 10% increment to a number that already represents 110% of cost.
Where a unit cost is derived from a batch, reconcile both the batch total and supplied quantity before applying the percentage. Keep sufficient precision at the allocation and per-unit stages. The taxable value is separate from the GST amount: 110% is a valuation factor, not a GST tax rate. The following illustrations calculate taxable value only, excluding GST and cess.
Rule 31 is a reasoned method, not a free-choice price
The residual rule requires reasonable means consistent with section 15 and the valuation chapter. It does not authorise an arbitrary figure simply because cost records are incomplete. For services, its express proviso permits the supplier to bypass Rule 30, but the selected approach still needs a defensible factual and legal basis. Record the option, method, comparability or other evidence and limitations.
Review actual invoices, quantity changes, returned goods and later corrections against the chosen route rather than using cost variations to overwrite original values silently. A costing estimate and a commercial discount are different facts. Keep the valuation memo, cost bridge, calculation and reporting reconciliation together so a reviewer can identify an error without rebuilding the entire ledger.
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: Manufactured output after the fallback is established
Assume Rule 30 properly applies. Validated costs for the supplied batch are materials ₹3,00,000, direct labour ₹1,50,000 and attributable factory costs ₹50,000. Total cost is ₹5,00,000. Value is ₹5,00,000 × 1.10 = ₹5,50,000; the increment is ₹50,000.
Illustrative example 2: Acquired goods and the supplied quantity
For 200 supplied units, validated purchase cost is ₹1,250 each and other included acquisition cost totals ₹10,000. Total cost is ₹2,50,000 + ₹10,000 = ₹2,60,000. Rule 30 value is ₹2,86,000, or ₹1,430 per unit. No additional GST amount is computed here.
Illustrative example 3: A service cost working where Rule 30 is used
For a service whose valuation route validly reaches Rule 30, attributable staff cost is ₹1,80,000, subcontract cost ₹60,000 and other validated service cost ₹60,000. Total cost is ₹3,00,000 and value ₹3,30,000. The calculation does not remove the supplier’s separate Rule 31 service option; it assumes that option is not used.
Illustrative example 4: Allocate a supported common-cost pool
A validated common manufacturing-cost pool is ₹1,20,000. A justified machine-hour allocation uses 1,500 hours for the supplied batch out of 6,000 total hours: 25%, or ₹30,000. Add direct validated cost of ₹2,20,000 to obtain ₹2,50,000. Rule 30 value is ₹2,75,000. Charging the entire pool to this batch would incorrectly produce ₹3,74,000, ₹99,000 too high.
Illustrative example 5: Do not mark up an already marked-up value
The cost sheet already shows ₹3,30,000 as 110% of an established ₹3,00,000 cost. Applying 1.10 again would produce ₹3,63,000, overstating the intended Rule 30 value by ₹33,000. Reconcile the meaning of the source field before multiplying.
Illustrative example 6: Markup on cost is not margin on value
Validated cost is ₹4,50,000. Rule 30 value is ₹4,95,000. Dividing ₹4,50,000 by 0.90 gives ₹5,00,000, a ₹5,000 overstatement. At the correct value, the ₹45,000 increment is 10% of cost but approximately 9.09% of value.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Establish that a supply exists | Contract, movement and applicable supply analysis |
| 2 | Identify the governing valuation route | Section 15 and relevant rule memo |
| 3 | Resolve preceding methods and special provisions | Comparable/option evidence or documented reason for fallback |
| 4 | Identify goods production, acquisition or service cost | Cost-base classification matched to the actual supply |
| 5 | Reconcile direct cost to source records | Ledger, invoices and cost-sheet links |
| 6 | Validate common-cost categories and allocation drivers | Pool, driver, quantity and period support |
| 7 | Check the supplied quantity and unit cost | Batch-to-shipment reconciliation |
| 8 | Apply 1.10 once to the established base | Independent markup calculation |
| 9 | Document any Rule 31 service option separately | Reasonable method, evidence and consistency analysis |
| 10 | Reconcile taxable value to reporting | Invoice values, corrections and retained workings |
Sixteen practitioner FAQs
1. Is Rule 30 a universal minimum price?
No. It is a fallback valuation provision. A normal unrelated-party sale is not automatically lifted to cost plus 10% merely because it is loss making.
2. What percentage does Rule 30 prescribe?
The value is 110% of the relevant established cost. This is a valuation factor, not the GST tax rate.
3. Can the cost method replace an available preceding basis?
Not merely because it is convenient or produces a preferred result. Establish the governing sequence and applicable options first.
4. Does an uncharged movement always require 110% valuation?
First determine whether there is a supply under the applicable law. Valuation does not itself create the supply.
5. Which base applies to manufactured goods?
The rule refers to production or manufacturing cost. Build a supported bridge to the actual supplied output.
6. Which base applies to acquired goods?
The relevant cost of acquisition must be established for the goods and quantity being supplied, with supported included components.
7. Can all annual company expenses be allocated to one shipment?
No. Validate attribution, period and allocation. A balanced ledger does not prove that its whole cost pool belongs to one supply.
8. Does Rule 30 expressly mandate CAS-4 for every case?
The Rule 30 text itself does not impose that universal statement. Check the actual legal and costing requirements applicable to the case.
9. Can a service supplier bypass Rule 30?
Rule 31’s proviso expressly permits a service supplier to opt for Rule 31 while ignoring Rule 30, subject to its reasonable-means requirements.
10. Does Rule 31 permit any price selected by management?
No. The method must be reasonable and consistent with section 15 and the valuation chapter, with factual support.
11. Is dividing cost by 90% the same calculation?
No. It targets a different selling-price margin. Rule 30 requires multiplying the established cost by 1.10.
12. Should 10% be added twice if two systems process the invoice?
No. Identify whether the imported field is cost or a value already containing the markup, and apply the factor only once.
13. How should common manufacturing costs be handled?
Use a justified allocation method linked to the relevant output and period, after validating that the cost category belongs in the base.
14. Are the illustration cost categories mandatory classifications?
No. Each illustration assumes its included costs have already been validated. Actual inclusion and exclusion decisions need their own support.
15. Where should rounding take place?
Keep sufficient allocation and per-unit precision. Apply the actual reporting requirements at the appropriate final stage and retain any reconciliation difference.
16. What makes the valuation file reviewable?
A supply conclusion, route memo, source-linked cost bridge, allocation driver, one-time markup and invoice/reporting reconciliation should fit together.
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
Document why the cost route applies before calculating 110%. Keep the base and allocation reproducible, apply the factor once and justify any separate Rule 31 service method.