ECJ Interpretation of ‘cost price’ for valuation and payment of VAT

by Vikash Agarwal

The Hon’ble European Court of Justice (C-207/23) recently ruled that the cost price includes not only direct manufacturing or production costs but also indirectly attributable costs, such as financial costs, etc. whether or not those costs have been subject to input VAT. It is further held that the cost price should be as close as possible to the purchase price had the underlying goods been acquired.

A somewhat similar provision (Rule 30) we have under the GST Law. This ruling seems to have boarded the scope of costs that can be included in the calculation of the cost price.

Needless to state that the businesses without any tax leakages are not impacted.