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2021 (8) TMI 355 - AAR - GSTApplicability of GST - cost of the diesel incurred for running DG Set in the course of providing DG Rental Service - HELD THAT - The contract entered between the applicant and the recipient is for the hiring of DG Set and is a comprehensive contract with the consideration having a fixed component and a variable component. The fixed component is the monthly fixed rent charged in the invoice for the DG Set and the variable charge is the charge for the diesel used. Both are part of the same consideration and is for the contract of supplying DG Set on hire. Though it appears that the applicant is receiving the reimbursement of diesel cost, the recipient is not paying for the diesel but for the services of DG Set, which is an integral part of the supply of DG Set rental service. There is no separate contract for supply of diesel and the invoice issued for the reimbursement of diesel cost is nothing but a supplementary invoice issued for the supply of rental service of DG Set. The consideration for reimbursement of expenses as cost of the diesel for running of the DG Set is nothing but the additional consideration for the renting of DG Set and attracts CGST @ 18%.
Issues:
1. GST applicability of cost of diesel incurred for running DG Set in providing DG Rental Service. Analysis: The applicant, a partnership firm engaged in the business of leasing DG Sets, sought an advance ruling on the GST applicability of diesel costs incurred for running DG Sets in providing rental services. The applicant discharged tax at 18% on DG Set hiring charges and reimbursement of diesel costs. However, a recipient of services objected to the tax on diesel reimbursement, claiming diesel falls outside GST purview as a non-GST good. The applicant argued that reimbursable expenses should be included in the value of taxable services, citing a previous court ruling. During the personal hearing, the applicant reiterated the facts. The Authority considered the submissions and relevant provisions of the CGST and KGST Acts. It observed the applicant's tax payments on leasing charges and diesel reimbursement. The key question was analyzed under Section 15(1) of the CGST Act, which defines the value of supply. The reimbursement of diesel costs was deemed part of the consideration under Section 2(31) of the Acts. The contract between the applicant and the recipient included fixed rent and variable diesel charges as part of the same consideration for supplying DG Sets on hire. The diesel reimbursement was considered an additional consideration for the rental service, subject to CGST and KGST at 9%. Therefore, the ruling stated that the diesel cost incurred for running DG Sets in providing rental services constitutes additional consideration for the supply of DG Sets on rent, attracting CGST and KGST at 9%.
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