2020 (9) TMI 585 - AAR - GST

Valuation - inclusion of reimbursement (at actual) of fuel expenses - Pure agent - Rental services of aircraft including passenger aircrafts, freight aircrafts and the like with or without operator - Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT - Payment made or to be made by the recipient to the applicant would not only include the payment for the supply of services i.e. Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator but would also include the amount for the fuel filled in the aircraft by the applicant. Therefore, the amount of ATF fuel, which is received as reimbursement by the applicant will undoubtedly form a part of the consideration i.e. the value of the services provided by the applicant and GST is liable on the same. Therefore, in terms of Section 15(1) of the CGST Act, 2017, the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply - In the instant case, where the applicant and the customer are unrelated parties, the price actually paid or payable for the supply of services includes the value of services i.e. Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator as well as the amount for the fuel filled in the aircraft by the applicant, which would be the sole consideration for the supply as per the said section. Whether the applicant satisfies all the conditions and satisfies the conditions of a pure agent? - HELD THAT - The conditions to satisfy the term Pure Agent fails in the present case. In terms of the valuation provisions under GST legislation, amount recovered as reimbursement (at actual) by the applicant M/s. Global Vectra Helicorp ltd. from the customer, for the fuel procured on behalf of the Customer is required to be included in the value of services provided by the Applicant.

Summary

Issues Involved:
1. Classification of services provided by the applicant.
2. Applicability of GST on fuel reimbursements.
3. Determination of whether the applicant acts as a 'pure agent' under GST rules.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Applicant:

The applicant, M/s. Global Vectra Helicorp Ltd., provides "Rental services of aircraft including passenger aircrafts, freight aircrafts, and the like with or without operator" under HSN heading 996603. This service is classifiable under Heading 9966 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which specifies an applicable GST rate of 18% (9% SGST + 9% CGST).

2. Applicability of GST on Fuel Reimbursements:

The applicant contends that the fuel costs reimbursed by the customer should not be included in the value of taxable services as they act as a 'pure agent' and the fuel costs are merely reimbursements. However, Section 2(31) of the CGST Act, 2017 defines 'consideration' to include any payment made or to be made in respect of the supply of goods or services. The payment made by the recipient includes both the service charges and the fuel costs, thus forming part of the 'consideration' for the services provided. Section 15(1) of the CGST Act, 2017 further elaborates that the value of supply includes the price actually paid or payable for the services, which in this case includes the fuel costs. Therefore, the reimbursement for fuel costs forms part of the value of services and is liable for GST.

3. Determination of Whether the Applicant Acts as a 'Pure Agent':

To qualify as a 'pure agent' under Rule 33 of the CGST Rules, 2017, several conditions must be met:
- The supplier must act as a pure agent of the recipient when making the payment to the third party on authorization by such recipient.
- The payment made by the pure agent must be separately indicated in the invoice issued to the recipient of service.
- The supplies procured by the pure agent must be in addition to the services supplied on his own account.

The applicant's contract with ONGC authorizes them to procure fuel on behalf of the customer and get reimbursed at actual costs. However, the applicant has not provided documentary evidence to prove that the reimbursement is without markup. Additionally, the cost of fuel is charged through separate debit notes rather than being indicated in the service invoice, and the fuel procured is essential for the applicant to provide the rental services, thus not qualifying as an additional supply. Therefore, the applicant does not satisfy the conditions to be considered a 'pure agent.'

Ruling:

In terms of the valuation provisions under GST legislation, the amount recovered as reimbursement (at actual) by the applicant from the customer for the fuel procured on behalf of the customer is required to be included in the value of services provided by the applicant.