The package price can determine value even where the commercial price differs
Rule 31D, effective from 1 February 2026 through Notification 20/2025–Central Tax dated 31 December 2025, deems the value of its specified goods to be declared retail sale price less applicable tax. It overrides the other provisions of the valuation chapter for those goods. Accordingly, an ordinary invoice-price or discount worksheet is not a sufficient valuation control. This guide, checked on 28 October 2026, concentrates on package-level valuation rather than the separate manufacturer levy or return-filing systems. CGST Rules: Rule 31D and its explanations.
Classify both the goods and the tariff entry
The rule's table covers pan masala under 2106 90 20; unmanufactured tobacco and tobacco refuse under 2401 other than tobacco leaves; the specified cigars, cheroots, cigarillos and cigarettes under 2402; the described other manufactured tobacco and substitutes under 2403 other than biris; and the specified inhalation-without-combustion products under 2404 11 00 and 2404 19 00. Do not extend this rule to every packaged consumer product or use a broad heading while overlooking its description or exclusion. CGST Rules: Rule 31D and its explanations.
Extract tax instead of applying tax again to a tax-inclusive price
Under sub-rule (2), the amount for an applicable tax component equals RSP multiplied by that component's percentage divided by 100 plus the sum of applicable tax percentages. For an intra-State supply with applicable CGST and SGST, use their combined percentage in the denominator and the relevant component in each numerator. For an inter-State supply, apply the appropriate IGST structure. Value equals RSP less the resulting applicable GST amounts, rather than RSP plus another full GST charge. CGST Rules: Rule 31D and its explanations.
Read the RSP explanations before selecting a number
The explanation defines RSP as the declared maximum price for sale of the packaged goods to the ultimate consumer, including all taxes, duties, surcharge and cess. Multiple RSPs declared on the same package require the highest. An alteration increasing RSP before, during or after supply is treated as the RSP. Different RSPs declared on different packages for different sale areas are dealt with using the price for the intended area. An area-specific package is not automatically valued using the highest price on a different area's package. CGST Rules: Rule 31D and its explanations.
Keep discounts and other levies in their proper workings
A discounted commercial receipt does not itself replace Rule 31D's prescribed base. Equally, the fact that RSP includes duties and cess is not a direction to deduct every such levy separately from it: follow the rule's applicable-tax formula and separately verify any other levy. The GST Council's December 2025 newsletter explains the notified February 2026 package, including 40% GST for the specified pan masala/tobacco categories and the compensation-cess change. Confirm the exact product and supply date; a Council recommendation alone is not the charging notification. CGST Rules: Rule 31D and its explanations.
Build a package-and-area register
Record product code, classification, package size, declared RSP, quantity of packages, area designation, applicable tax components and effective dates. Retain package photographs or approved label proofs and evidence of price alterations. A carton containing retail packs needs a reliable count and identification of the relevant declared package prices; do not multiply a per-pack price by a weight or carton count with incompatible units. Split lots when different prices or areas apply. CGST Rules: Rule 31D and its explanations.
Review the output without claiming a complete sector compliance guide
Reconcile extracted value and tax to the return and invoice working, and separately investigate a commercial-price difference. Rule 86B's connected exception for certain non-manufacturers has its own conditions; valuation does not establish a blanket exemption from cash-payment restrictions, ITC conditions or other obligations. These examples assume correctly classified pan masala supplies after commencement, an applicable total GST rate of 40%, and no other issue changing the calculation. No excise or other separate levy is computed here. CGST Rules: Rule 31D and its explanations.
Applicable primary references
CGST Rules: Rule 31D and its explanations GST Council Secretariat: December 2025 notifications, pages 3–4
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Extracting total GST from the declared price
For 1,000 qualifying packs with RSP ₹140 each, aggregate RSP is ₹1,40,000. At an applicable total GST rate of 40%, GST is ₹1,40,000 × 40/140 = ₹40,000 and value is ₹1,00,000. For an intra-State case with 20% CGST and 20% SGST, each component would be ₹20,000 under these assumptions.
Illustrative example 2: Commercial discount does not reset the prescribed value
Take 100 qualifying packs, each with RSP ₹140, but actual tax-inclusive commercial consideration ₹112 per pack. Aggregate RSP remains ₹14,000, producing value ₹10,000 and GST ₹4,000. Extracting GST from actual consideration ₹11,200 would instead give ₹3,200, understating this model's GST by ₹800. Reconcile the commercial difference separately.
Illustrative example 3: Two prices on the same package
Each of 200 qualifying packages declares RSPs ₹140 and ₹154. Use ₹154 under the highest-price explanation. Aggregate RSP ₹30,800 gives value ₹22,000 and GST ₹8,800. Using the lower declaration would give GST ₹8,000, a difference of ₹800.
Illustrative example 4: An upward price alteration
Assume the applicable explanation treats an alteration from ₹140 to ₹168 as the RSP for 300 packs. Aggregate altered RSP ₹50,400 gives value ₹36,000 and GST ₹14,400. The original-price working would show value ₹30,000 and GST ₹12,000. The change in this lot's tax working is ₹2,400, not the full ₹8,400 RSP increase.
Illustrative example 5: Separate area-designated packages
A lot contains 100 packs declared for area A at RSP ₹140 and 200 packs declared for area B at RSP ₹210, with evidence that the respective area conditions apply. Aggregate RSP is ₹14,000 plus ₹42,000 = ₹56,000. Value is ₹40,000 and GST ₹16,000. Do not apply area B's price indiscriminately to all 300 packs.
Illustrative example 6: Do not round the unit calculation prematurely
For three packs with RSP ₹99 each, aggregate RSP is ₹297. Exact extracted value is ₹297/1.40 = ₹212.142857… and GST ₹84.857142…. Showing ₹212.14 and ₹84.86 preserves ₹297 at two decimals. Rounding the unit value ₹70.714285… first to ₹70.71 and multiplying by three produces ₹212.13, one paisa less. Use a documented consistent precision policy subject to applicable reporting rules.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the supply date | Commencement and subsequent amendment review |
| 2 | Verify tariff and description | Classification memo and exclusions |
| 3 | Identify the retail package | Label, pack size and carton conversion |
| 4 | Capture declared prices | Approved artwork or package evidence |
| 5 | Resolve multiple declarations | Highest price on the same package |
| 6 | Review price alterations | Dated changes and affected lots |
| 7 | Separate intended sale areas | Area-marked packages and dispatch evidence |
| 8 | Verify applicable tax components | Rate notification and supply classification |
| 9 | Calculate and reconcile | Quantity, aggregate RSP, value and GST components |
| 10 | Retain an auditable closing file | Invoices, return bridge, rounding and exception sign-off |
Sixteen practitioner FAQs
1. Does Rule 31D apply to all goods carrying an MRP?
No. Its specified tariff entries and descriptions determine its scope.
2. When did the rule commence?
Notification 20/2025–Central Tax makes the relevant amendment effective from 1 February 2026.
3. Are tobacco leaves included simply because they fall under 2401?
The rule's description excludes tobacco leaves.
4. Does the 2403 entry include biris?
Its description excludes biris; do not use this table indiscriminately.
5. Is the deemed value the RSP plus GST?
No. It is the declared RSP less applicable tax under the rule's formula.
6. How are two intra-State GST components extracted?
Use each component's rate in its numerator and the sum of applicable rates in the common denominator.
7. Can an ordinary dealer discount automatically reduce the base?
It does not itself displace the prescribed RSP-based valuation.
8. Which price applies when a package shows two RSPs?
The explanation selects the maximum declared on that package.
9. What does the rule say about an increased RSP?
It addresses upward alteration before, during or after supply and treats the altered RSP as relevant.
10. Must all regions use the highest price found anywhere?
No. The explanation separately addresses different area-specific prices on different packages.
11. Does RSP include duties and cess?
The definition includes them, but that does not authorise subtracting every separate levy outside the stated GST formula.
12. Is a GST Council recommendation enough to implement a rate?
No. Check the effective notified law for the product and date.
13. Can a carton count replace the retail-pack quantity?
Only after verifying the correct unit conversion and the packages whose RSP is relevant.
14. Should per-pack tax always be rounded before aggregation?
Avoid premature rounding; preserve adequate precision and follow the applicable reporting rules.
15. Does correct valuation prove ITC eligibility?
No. Credit conditions need their own review.
16. Does Rule 31D itself exempt all dealers from Rule 86B?
No. The connected exception has a specified non-manufacturer and supplier-tax-payment scope; verify its conditions separately.
Conclusion
Apply Rule 31D to specified goods using declared retail prices, correct package quantities and tax extraction, with separate area and price-change evidence.