Should I agree to referee a paper when I don't feel I can judge its importance? Background: I am a first-year PhD student in pure mathematics studying subject X. With my supervisors, I recently published on arXiv a paper on a particular example A that explores how X works when applied to A. My contribution to this paper was partial (a couple of proofs and calculations) but I did read and check the whole paper before submission.

I have recently been asked to referee a paper for a reputable journal also on the application of subject X but to a different example B. The two examples are distinct but are of roughly the same flavour overall.

Initially I thought that I was too junior to agree to referee this paper. I am only a first year PhD after all and my only paper so far hasn't been peer-reviewed yet. But having looked through the paper, I do believe that I am qualified to judge its veracity. 

My main concern however is that I do not feel able to judge whether this paper is substantial enough or the results are new enough to merit publication in this journal. My opinion having read the introduction is that the paper is an interesting application of X and is worthy for publication. However, I have not read many papers from the journal, and the total number of papers I have read is small so I do not necessarily feel qualified to judge whether this paper is suitable for publication in this particular journal.

Despite this, I still think I could provide a useful review in the sense that I could do one half of the referees job: that of verifying the results in the paper. So my question is this:

Question: Should I agree to referee this paper even if I do not feel I can judge whether the paper is worthy of publication on the grounds of importance and interest? Should I talk to the editor about this before accepting?
I also started reviewing just recently (pure Math; mainly Algebra/Combinatorics) and when writing my first review with some assistance from my advisor, she taught me that it is not the reviewers job to judge if a paper fits well into a journal or not, that is the editors job.
Apart from checking the paper for correctness, giving helpful comments to make it nicer, etc. you can and should of course also judge it. However, I would not say "this is a good fit for journal XY because ..." but rather something like "this paper is really well written and generalizes the prominent result by A. and al." Or, if it is not well written, then you might also say that, e.g. "while the paper seems technically correct (up to minor points listed below), the page long calculations make it hard to follow and the authors fail to give an abstract overview of what they are doing."
The editor will then decide if the paper should be published in the journal or not, taking into account all reviews, maybe also how many papers were sent for this issue, etc.

Of course, as user2768 pointed out, you can let the editor know that while you will happily judge the correctness and readability of the paper, you are still to junior to properly give a statement on its expected impact.
That is totally ok and editors are aware that there isn't an infinite amount of perfect reviewers, who can comment on every aspect (in finite time...).
I would suggest that you also discuss this topic with your PhD-advisor; if he/she is willing to, you might even let him read over it before you send it.