Notification No.: 20/2025 – Central Tax
Date of Notification: 31st December, 2025
Relevant Sections and Rules:
Central Goods and Services Tax Act, 2017:
- Section 15 – Value of Taxable Supply
- Section 164 – Power of Government to make rules
Central Goods and Services Tax Rules, 2017 (As Amended):
- Insertion of Rule 31D – Value of supply of goods on basis of retail sale price
- Amendment to Rule 86B – Restriction on use of electronic credit ledger
Summary of Notification:
This notification introduces Rule 31D in the CGST Rules, 2017 providing a special valuation mechanism for specified goods such as pan masala, unmanufactured tobacco, cigarettes, other manufactured tobacco (excluding biri), and specified tobacco/nicotine inhalation products falling under Chapters 21 and 24 of the Customs Tariff. It mandates that the value of supply of such goods shall be deemed to be the declared Retail Sale Price (RSP) less the applicable tax component, notwithstanding anything contained in the general valuation provisions of the Chapter.
The notification further prescribes a statutory formula for computing the tax amount embedded in the retail sale price, namely:
Tax Amount = (Retail Sale Price × Applicable Tax Rate) ÷ (100 + Sum of Applicable Tax Rate).
This ensures uniform deduction of tax from the declared RSP and provides certainty in determination of taxable value.
Detailed explanations clarify that “retail sale price” shall mean the maximum price declared on the package inclusive of all taxes and levies; where multiple RSPs are declared, the highest shall prevail; where RSP is increased before, during or after supply, the increased price shall apply; and where area-wise pricing exists, the relevant area-specific RSP shall govern valuation. These safeguards aim to prevent undervaluation and revenue leakage in sensitive sectors.
Further, Rule 86B has been amended to provide that registered persons (other than manufacturers) dealing in goods specified under Rule 31D shall be exempt from the electronic credit ledger restriction under Rule 86B, provided tax has been paid by the supplier on RSP basis. This amendment prevents unnecessary working capital blockage in the supply chain of such notified goods.
