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TMI Blog2022 (7) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, is subject to GST if it is consideration for a supply of goods or services. Here the toll charges are consideration paid for access to a road which is incurred while performing the renting of road vehicles service undertaken by the applicant - the toll charges are incurred by the applicant while performing the agreed supply and is a cost for the applicant. Further for a reimbursement, the relationship between the service provider and recipient needs to be that of mere provider and receiver and not that of an agent. It is established that the applicant has been engaged by their clients only as a service provider of transportation services and not as an Agent. The Applicant, being the service provider of transportation service, is the recipient of the service provisioned on payment of toll. Such charges are costs incurred, so that his vehicles can access roads/bridges to provide transportation services to the recipient. Hence they are the beneficiary and liable to pay the toll, which is compulsorily levied on the vehicles. The expenses so incurred are, therefore, cost of the service provided to their service recipients - the cost of toll charges which are paid by the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that SI.No.23 of Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017 as amended exempts the intra-State supply of services of description as specified in column (3) of the Table from so much of the central tax leviable thereon under sub-section (1) of section 9 of the said Act, viz. Service by way of access to a road or a bridge on payment of toll charges falling under Heading 9967. They have stated that being engaged in the support services of transport of employees to various companies, during the course of provision of such service they incur toll charges on a regular basis which the clients are reimbursing, i.e., actual amount of toll charges paid. GST applicable to rental services road vehicles including buses (996501) and other transport services (996799) are discharged regularly. However, the applicant seeks clarification on whether the said exempted service availed by them during the course of providing transport service on payment of toll char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir submissions. The Member sought clarification as to whether they supply services of providing access to road for a toll charge as they have sought the applicability of the exemption provided to such suppliers, for which the AR replied that they are providing only passenger transport services and incurring toll charges which is shown separately in the invoices. When questioned about how the toll charges are remitted the AR replied that presently it is done through fast tag, previously by cash. They were asked to submit the Write up on details of services provided by applicant; invoice raised for the services provided and contract copies with clients for provision of service of transport. 3.2 The applicant vide their letter dated 22.04.2022 submitted the following documents:- Write up about the company in operation: They are providing support services, viz. Rental services of road vehicles including buses, coaches, cars, and other motor vehicles, with operator classified under HSN Code 996601 and other transport services classified under HSN Code 996799 and are discharging GST at appropriate rates. The applicant Company enters into contract with their clients for suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices of road vehicles including buses, coaches , cars, trucks and other motor vehicles with operator classified under HSN code 996601; that the other part of the support service viz., Other transport services classified under HSN Code 996799 is also registered for providing the said service occasionally and not on regular basis; that the ARA is filed seeking the ruling in respect of applicability of exemption of GST on toll charges in respect of Rental services of road vehicles and that the documents called for have been already submitted both online and manually. Further the copy of signed agreement entered into with M/s Cognizant Technologies highlighting the Scope of work has been submitted. 4. The Centre Jurisdictional authority, Chennai South Commissionerate, who has administrative control over the applicant was addressed vide this office letter dt.29.03.2022 requiring to furnish the comments on the issue raised by the applicant and to report whether any proceedings are pending in respect of the applicant. The said authority has not furnished the report on pending proceedings and the comments on the issues raised. Hence it is construed that no proceedings are pending in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ruling' as,- Section 95: In this Chapter, unless the context otherwise requires,- (a) advance ruling means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of Section 97 or sub-section (1) of Section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. From the above, it is evident that an applicant can seek an Advance Ruling only in relation to supply of goods or services or both undertaken or proposed to be undertaken by them. The exemption available vide Sl.No.23 in Col(3) of the Table to Notification No. 12/2017-CT(rate) dated 28.06.2017, is available to the service provider only and not to the service receivers. Further when questioned during Personal hearing about whether they are providing service of providing access to a road, the Applicant answered that they are only utilizing the services on payment of toll charges. Hence question no.1 is not admissible in as much as the applicant is only a recipient of such toll services. Questions 2 and 3 being on valuation to be adopted for the supply being ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be fore delivery of goods or supply of services; Applying the above provisions, it is seen that the supply of renting of road vehicles is carried out by the applicant to their clients and the toll charges incurred is an incidental expense incurred during the supply of such service. This incidental expense incurred by the applicant is being reimbursed separately by the recipient of service. 8. To ascertain if the toll charges are to be treated as reimbursement or disbursement as claimed by the applicant, the meaning of the word 'reimbursement' is analysed. In general parlance, the term reimbursement refers to the recovery of an expense that a person (the service provider) incurs as a principal from another party. On the other hand, the recovery of a payment made on behalf of the recipient of service by the provider of such service as an agent is termed as a disbursement . A disbursement does not constitute a supply and hence, is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion service, is the recipient of the service provisioned on payment of toll. Such charges are costs incurred, so that his vehicles can access roads/bridges to provide transportation services to the recipient. Hence they are the beneficiary and liable to pay the toll, which is compulsorily levied on the vehicles. The expenses so incurred are, therefore, cost of the service provided to their service recipients. Reimbursement of such cost is no disbursement, but merely the recovery of a portion of the value of supply made to the recipients Toll charges paid are therefore, to be included in the value of supply as incidental expenses arising while provision of service. Thus the cost of toll charges which are paid by the applicant and later reimbursed by their clients should be included in the value of supply and tax shall, therefore, be payable at the applicable rate on the entire value of the supply, including toll charges paid. 10. To sum up, the Applicant is a service provider of transportation services to their clients and the toll charges incurred by them and later reimbursed from the service recipients should be included in the value of supply and tax be paid at the appropriat ..... 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