2023 (9) TMI 854 - AAAR - GST

Valuation - inclusion of value of material and cost of execution of work for installation of lines will be included in the value of supply for determination of taxable value under GST where all such cost are taken as reimbursement or not - value of material and cost of execution of work for installation of lines will be included in the value of supply for determination of taxable value under GST where all such cost are borne by the recipient of service and only supervision fee charged by applicant? HELD THAT - The supply has been defined under Section 7 of CGST Act, 2017 which includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business . Further as per definition provided under Section 2(31) of GST Act, 2017, Consideration, means any payment made or to be made, whether in money or otherwise in respect of, in response to or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given the Central Government or a State Government. The Authority for Advance Ruling is correct in holding that value of material and cost of execution of work for installation of lines will be included in the value of supply for determination of taxable value under GST where all such cost are taken as reimbursement. Entire cost is borne by the recipient of service - HELD THAT - The Authority for Advance Ruling has held that the value of taxable supply shall not include the material cost and the appellant shall be liable to pay GST on supervision charge only to avoid double taxation subject to the condition that tire contractor/recipient of service should have GST invoice which should be submitted after completion of project - it is found that that there is no such provision stipulated under GST Act and this condition is unwarranted and having no legal backing as argued by the appellant. Thus, where the value of materials and cost of execution of work for installation of electric lines are borne by the recipient of service and the appellant charges supervision fee only, the value of materials and cost of installation shall not be included in the value of supply for determination of taxable value under GST and the appellant shall be liable to pay GST only on the supervision charges.

Summary

Issues Involved:
1. Inclusion of the value of material and cost of execution of work in the taxable value under GST.
2. Condition of submission of GST invoice by the customer/service recipient.

Summary:

Issue 1: Inclusion of Material and Execution Costs in Taxable Value

The Appellant, M/s Purvanchal Vidyut Vitran Nigam Limited, sought clarification on whether the value of material and cost of execution of work for installation of electric lines should be included in the taxable value under GST. The Authority for Advance Ruling (AAR) ruled that such costs should be included in the taxable value when they are reimbursed by the customer, as per Section 15 of the CGST Act, 2017. This is because the value of supply includes any amount the supplier is liable to pay but incurred by the recipient and not included in the price actually paid or payable.

Issue 2: Condition of Submission of GST Invoice

The AAR's ruling on the second question stated that the appellant should only pay GST on the supervision charge when the entire cost is borne by the service recipient, provided the customer submits a GST invoice. The Appellant contested this condition, arguing that there is no provision in the GST Act that mandates the submission of a GST invoice by the customer. The Appellate Authority agreed with the appellant, noting that the condition imposed by the AAR was unwarranted and had no legal backing.

Conclusion:

The Appellate Authority upheld the AAR's ruling that the value of material and cost of execution should be included in the taxable value when reimbursed by the customer. However, it struck down the condition requiring the submission of a GST invoice by the customer, confirming that the appellant should only pay GST on the supervision charges when the entire cost is borne by the recipient of the service.