2022 (5) TMI 966 - AAAR - GST

Valuation of supply - diesel filled free of cost by the service recipient in the engaged chartered (dedicated) vehicles - would form part of value of supply of service charged by the Appellant or not - levy of on value of diesel filled free of cost by the service recipient or otherwise under GTA service - difference of opinion - HELD THAT - The issue is not answered and it is deemed that no ruling is issued under Section 101(3) of the CGST/ CG SGST Act, 2017 because of the divergence of opinion between the two members.

Summary

Issues Involved:
1. Whether diesel filled free of cost by the service recipient in the engaged chartered (dedicated) vehicles would form part of the value of supply of service charged by the Appellant.
2. Whether GST would be leviable on the value of diesel filled free of cost by the service recipient under GTA service.

Detailed Analysis:

1. Whether diesel filled free of cost by the service recipient in the engaged chartered (dedicated) vehicles would form part of the value of supply of service charged by the Appellant:

The Appellant, a GTA service provider, contends that diesel provided free of cost by the service recipient should not be included in the value of the supply of service. The Appellant argues that the diesel is not within their scope of supply, as per the draft contract terms. The contract specifies that the service recipient is responsible for providing the diesel, which remains their property and is not transferred to the Appellant.

The Appellant supports their argument by referencing Section 15(1) of the CGST Act, which states that the value of supply is the price actually paid or payable. They argue that since the diesel is not part of the freight consideration, it should not be included in the value of supply. They further cite Section 15(2)(b), which includes any amount the supplier is liable to pay but has been incurred by the recipient. The Appellant asserts that since they are not liable for the diesel, it should not be added to the value of supply.

The Appellant also references several judicial precedents under the erstwhile Service Tax regime, where it was held that the value of free supplies provided by the recipient does not form part of the gross amount charged for the service.

2. Whether GST would be leviable on the value of diesel filled free of cost by the service recipient under GTA service:

The CGST member finds that diesel is an essential component for providing GTA services, and its cost should be included in the value of supply. The member references Section 15(2)(b) of the CGST Act, which includes any amount the supplier is liable to pay but has been incurred by the recipient. The member argues that the diesel is an essential expense for the GTA service and should be considered as additional consideration flowing from the recipient to the service provider.

The CGST member also distinguishes the provisions of Section 15 of the CGST Act from Section 67 of the Finance Act, 1994. The latter was interpreted by the Supreme Court in the Bhayana Builders case, which held that the cost of free supplies provided by the recipient does not form part of the gross amount charged. However, the CGST member argues that the provisions under the GST regime are different and should include the cost of diesel.

The SGST member, however, disagrees and references Circular No. 47/21/2018-GST, which clarifies that GST is applicable only on the value of supply charged by the service provider and not on materials not in the scope of the service provider. The SGST member also notes that the draft GST law included a provision for levying GST on FOC goods supplied by the recipient, but this was omitted in the final enacted GST Act, indicating that such supplies should not be included in the value of supply.

The SGST member further argues that the transaction is revenue-neutral since the service recipient can claim input tax credit on the GST charged on the GTA service. They also reference several judicial precedents and AAR rulings that support the exclusion of FOC goods from the value of supply.

Conclusion:

Due to the divergence of opinion between the CGST and SGST members, the issue remains unresolved. The CGST member holds that the value of diesel should be included in the value of supply and subject to GST, while the SGST member holds that it should not be included. Consequently, no ruling is issued under Section 101(3) of the CGST/CGST Act, 2017.