2019 (4) TMI 1402 - AAR - GST

Valuation - inclusion of value of Diesel provided by service recipient used in the trucks/ vehicles - transport services - whether to charge GST on freight amount excluding diesel cost or on total freight which is inclusive diesel cost? - HELD THAT - Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both is includible in value. In the instant case, the service recipient i.e. M/s Shree Raipur Cement, C.G is providing diesel to the vehicles used by the applicant to transport cement/clinker in the course of business of cement by the cement company. Diesel so provided by the service recipient to the applicant for use in trucks/ vehicles of the applicant forms an important and integral component of this business process, without which the process of supply of cement can never get materialized. Applicant are required to charge GST upon M/s Shree Raipur Cement, C.G on the total amount including the cost of diesel i.e. on the total freight amount inclusive of the cost of diesel so provided by the service recipient i.e. M/s Shree Raipur Cement.

Summary

Issues:
1. Whether GST should be charged on freight amount excluding diesel cost or on the total amount inclusive of diesel cost.

Analysis:
1. Facts of the case: The applicant, a transporter for cement companies, sought clarification on whether to charge GST on freight excluding diesel cost or on the total amount inclusive of diesel cost provided by the recipient.

2. Contentions of the applicant: The applicant argued that as per GST valuation rules, if the recipient provides input goods, the cost should be included in the taxable value of services. They believed GST should be charged on the total amount, including diesel cost, with the recipient issuing a separate invoice for diesel.

3. Legal Position and Discussion: The authority analyzed relevant sections of the CGST Act, 2017. Section 15(2)(b) specifies that any amount incurred by the recipient but not included in the price paid is includible in the value. The definition of consideration under Section 2(31) includes any payment made for the supply of goods or services. The authority noted that diesel provided by the recipient is integral to the business process and should be included in the value for GST calculation.

4. Decision: The authority ruled that GST should be charged on the total amount, including the cost of diesel provided by the recipient. The applicant was required to charge GST on the total freight amount, inclusive of the diesel cost provided by the service recipient.

This judgment clarifies the valuation and inclusion of costs in determining the taxable value for GST purposes, emphasizing the importance of considering all aspects of a transaction, including any additional costs borne by the recipient.