2022 (4) TMI 464 - AAR - GST

Valuation of Supply - Superior Kerosene Oil (SKO) made by the applicant for domestic purposes to fair price dealers in terms of the license granted by the Director of Consumer Goods, Government of West Bengal - HELD THAT - The license in FORM-B granted by the Director of Consumer Goods, Government of West Bengal has been issued under Paragraph 5 of the West Bengal Kerosene Control Order, 1968. The applicant has been licensed as an Agent to sell P.D.S. Kerosene from authorized depot at an approved selling price to the Dealers and Permit Holders as directed by the Licensing Authority. The status of the applicant, therefore, undisputedly appears to be an Agent who has been licensed to sell P.D.S. Kerosene to the Dealers and Permit Holders - the applicant has executed an agreement with the Oil Marketing Company namely Indian Oil Corporation Limited and has been granted a license under paragraph 5 of the West Bengal Kerosene Control Order, 1968 to carry on trade in Kerosene and thus the applicant satisfies all the conditions to qualify to be an agent . Whether an agent can be regarded as a fair price shop or not. It appears that a fair price shop is licensed to sell public distribution commodities against ration documents i.e., a fair price shop supplies S.K.Oil, along with other public distribution commodities, to the ration card holders only? - HELD THAT - The applicant cannot be regarded as a fair price shop . Since the entry serial number 11A of Notification No. 1498-FT dated 22.08.2017 Central Notification No. 21/2017-Central Tax (Rate) dated 22.08.2017 specifically refers supply of services provided by Fair Price Shops (FPS) and the applicant doesn t qualify to be a fair price shop , the applicability of the other aspects of the supply as referred to in the said entry are not discussed, i.e., (i) whether the applicant is supplying services to State Government or (ii) whether the applicant receives consideration in the form of commission or margin - the observation of the officer concerned from the revenue, cannot be accepted that the applicant is merely recovering the commission which he is eligible to earn from the IOCL in his capacity of an agent . In the instant case, the applicant admittedly charges, other than price of kerosene, commission, transportation charges, stationery charges, compensation on handling evaporation loss, to the recipient of goods i.e., dealers which are permitted / approved by the Director of Consumer Goods, Department of Food and Supplies, Government of West Bengal - the other elements involved in the instant supply shall not qualify for exemption. Therefore, the amount received by the applicant in this regard shall form a part of the value of supply on which tax shall be levied in terms of sub-section (1) of section 9 of the GST Act. The value of supply, as per clause (c) of sub-section (2) of section 15, shall include incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services. The aforesaid clause thus clearly specifies that in respect of supply of goods, any amount charged for anything done by the supplier at the time of, or before delivery of goods shall be a part of the value of supply.

Issues Involved:
1. Whether the applicant qualifies as a 'Fair Price Shop' for claiming the exemption.
2. Whether the invoice raised by the applicant to the dealers under PDS is considered a service 'to State Government'.
3. Whether other charges like agent’s commission, transport charges, stationery charges, H & E Loss, etc., are chargeable to GST or exempt.
4. Whether the supply of SKO along with other charges constitutes a composite supply with SKO as the principal supply.
5. Applicable GST rate on these other charges if they are taxable.
6. Whether there is a reversal of ITC attributable to exempt supplies and treatment of GST charged on the base price of SKO by IOCL for ITC reversal calculation under Rule 42 of the CGST Rules 2017.

Detailed Analysis:

1. Qualification as a 'Fair Price Shop':
The applicant, licensed as an agent under Paragraph 5 of the West Bengal Kerosene Control Order, 1968, supplies Superior Kerosene Oil (SKO) to dealers and permit holders, not directly to ration card holders. A 'Fair Price Shop' is defined as a shop licensed to distribute essential commodities directly to ration card holders under the Public Distribution System. The applicant, acting as an agent and not directly supplying to ration card holders, does not qualify as a 'Fair Price Shop'. Therefore, the applicant cannot claim the exemption meant for Fair Price Shops.

2. Invoice Raised to Dealers:
The applicant supplies SKO to dealers approved by the Director of Consumer Goods, Department of Food and Supplies, Government of West Bengal, not directly to the State Government. Hence, the invoices raised to these dealers are not considered services provided to the State Government.

3. Taxability of Other Charges:
The other charges, including agent’s commission, transport charges, stationery charges, and compensation for handling & evaporation loss, form part of the value of taxable supply. As per Section 15(2)(c) of the GST Act, incidental expenses charged by the supplier to the recipient at the time of or before delivery of goods are included in the value of supply. Therefore, these charges are subject to GST.

4. Composite Supply:
The supply of SKO along with other charges like transportation services constitutes a composite supply as per clause (30) of Section 2 of the GST Act. In this composite supply, the principal supply is the supply of SKO.

5. Applicable GST Rate:
Since the supply is considered a composite supply with SKO as the principal supply, the entire value of the supply, including other charges, attracts GST at the rate applicable to SKO. The applicable GST rate is 5% as per entry serial number 164 of Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017.

6. Reversal of ITC:
Given that the entire supply is taxable, there is no requirement for the reversal of Input Tax Credit (ITC) attributable to exempt supplies. The GST charged on the base price of SKO by IOCL will be treated as fully attributable to the taxable supply, and no ITC reversal under Rule 42 of the CGST Rules 2017 is necessary.

Ruling:
1. The applicant is not a 'Fair Price Shop'.
2. The applicant supplies to S.K.Oil dealers under PDS, not to the State Government.
3. Other charges form part of the value of taxable supply and attract GST.
4. The supply of SKO along with other charges is a composite supply with SKO as the principal supply.
5. The supply attracts GST at 5% on the entire value.
6. No reversal of ITC is required as the supply is taxable.

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