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TMI Blog2022 (7) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... . The jurisdictional officer in his report has given the views that GST is not leviable on Free of Cost (FOC) material provided by service recipient to applicant when such goods are in the scope of service recipient as per contractual terms. Transportation Activities - HELD THAT:- GTC has capacity of arranging trucks/trailers listed in Annexure-1 hereto. GTC will undertake transportation activities for ABC and the required trucks/trailers along with the driver and assistant will report at the day/time and place directed by ABC. The trucks/trailers so placed by GTC along with driver and assistance will be required to undertake transportation of the goods in accordance with the instructions of ABC - The activity of safe transportation is critical, and it is incumbent on GTC to ensure that goods are safely transported from point of origin to point of destination. For this, GTC ensures that it has experienced drivers and assistants who have the capacity to undertake transportation of industrial goods on trucks/trailers listed in Annexure-1 and understand load bearing capacity of the given trucks/trailers, maintenance of speed limit on full load, adequate safeguard measures on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per section 7 CGST Act, all forms of supply of services are considered as supply . It is also seen that Schedule I CGST Act which provides the levying GST on supplies made without consideration. In any case, it stood submitted by the Applicant that the proposed transaction is not being planned with related parties and therefore also Schedule I CGST Act is not applicable. It is seen that section 15 (2)(b) only includes the amount that the supplier is liable to pay in relation to such supply, but which has been incurred by the recipient and not included in the price actually paid or payable. Hence, trigger of section 15 (2)(b) CGST Act can be said to apply when the contractual liability is that of the supplier, but the same stands paid by the recipient. In the issue at hand, it is seen that the contractual liability of FOC diesel is not that of the Applicant. Therefore, FOC diesel cannot be included in the scope of supply proposed to be made by the Applicant. There is no economic gain made by the Applicant and no consideration received in reference to FOC diesel. Since contractual liability of FOC diesel is not proposed to be vested on the Applicant, the present proposed tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the GST Act . The issue raised by M/s Sunil Giri, Near Swami Dharmshala, ward 12, Suratgarh, 335804- Rajasthan. - (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (c) given as under: (c) Determination of time and value of supply of goods or service or both. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT: 1.0 The Applicant i.e. Sunil Giri, (the Proprietor of M/s. Giri Transport Company) is a Goods Transport Agency ( GTA for short) having its registered place of business at Swami Dharmashala, 12 Unnamed Road, Suratgarh, having GST Registration number 08CRBPG5309N1ZM. 1.1 The Applicant is about to enter into contract with its customer for providing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount the freight charged from the customer as business revenue and diesel filled in the trucks by the customer will not be accounted in the books of the Applicant, this is for the simple reason that according to the terms of the agreement the Applicant is not responsible for the diesel and also the Applicant will not be aware of the quantity and the value of diesel (rate at which it is procured by the customer) since it is filled directly in the fuel tank of the truck. The Applicant would be charging GST (under forward charge) on the freight charged. Considering that diesel is in the scope of the customer, nothing is chargeable by the Applicant from the customer for such diesel and no consideration for the diesel is paid or is payable by the Applicant to the customer and/or no adjustment from any amount payable to the Applicant is made / to be made by the customer. The payment against the service invoices are settled through bank transfer by the customer. APPLICANT S INTERPRETATION OF LAW 1.0 In the above backdrop, it is the bona fide understanding of the Applicant that value of diesel, which is in the scope of the customer, and as filled in the vehicle by them is not req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Finance Ministers in June 2016, there was a proposal to include the value of any goods and/or services provided by the recipient on free of cost basis. In view thereof, specific provision under Sec. 15 (Model Law) was also inserted. However, when GST was finally enacted and made applicable with effect from 01-07-2017, the requirement of inclusion of value of free issue material was deleted. Relevant extract of the Model GST law is reproduced here-in-below: Sec 15 : Value of taxable supply (1) ...... (2) The transaction value under sub-section (1) shall include: (a) .... (b) the value, apportioned as appropriate, of such goods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued, to the extent that such value has not been included in the price actually paid or payable; ........ Considering that the above provision was deleted and did not find place in the enacted GST Act, 2017, it is clear that the legislature, in its wisdom, does not seek to levy GST on such free of cost goods/ services and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much quantity of diesel in their tanks that they reach the location of service recipient. The Service Recipient shall devise a mechanism to calculate the consumption of diesel for transportation between two specified locations and shall fill that much quantity in the trucks/trailers as required. The terms of the draft agreement clearly provide that the Applicant is only responsible for the safe delivery of the consignment. Further, any accident or damage arising during the course of providing the transport service is the responsibility of the Applicant. The Applicant is also responsible to the drivers. The fuel will be in the scope of the service recipient and the Applicant is not concerned, in any manner, with reference to the free of cost fuel. As succinctly mentioned in the draft agreement, the Applicant will be issuing consignment note for each vehicle load/consignment. The consignment note, inter-alia, will bear information such as the consigner, consignee, name of goods (raw material) being transported, quantity of material loaded for transportation and freight consideration. On completion of the transport service i.e. the successful delivery of raw materials to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision was removed. The draft GST law stated that - 15(2)(b) - the value, apportioned as appropriate, of such goods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued, to the extent that such value has not been included in the price actually paid or payable However, in enacted GST law, this provision was deleted. This also makes it clear that the Section 15 as contained in the CGST Act 2017 does not include the value of FOC goods supplied by service recipient as per terms of contract and also makes it clear that the law makers have purposely deleted the said provision while enacting the GST Act, 2017. This view also gets affirmed from the fact that both the draft GST law and enacted GST law in section 15 contain the provision any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. 4. That furthermore, the provision relating to scope of supply is containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of a person liable to pay service tax . The Applicant submits that these provisions are pari-materia as both these sections deal with valuation of service. Further, the Applicant humbly submits that the decision of Hon ble Supreme Court in case of Bhayana Builders wherein it has been held by Hon ble Apex Court that FOC goods provided by recipient of service would not be included in the value of service on inter-alia the reason that such goods are not consideration as nothing is charged/chargeable nor is there any liability created on the service provider towards such FOC goods. Apropos to same, in Section 15(2)(b) of the CGST Act also the value of FOC goods provided by recipient of supply shall not be includible if the service provider (Supplier) is not liable for the same. 6. That furthermore, the present Applicant relies on various judgments (copies supplied separately) which though pertains to the service tax era but are on the same issue in relation to FOC diesel and other items by service recipient for GTA service and hence will squarely apply to the issue under consideration. In these decisions, the Courts adjudged the argument that diesel is an essential input wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have expressed the view that they need to charge GST to Shree Raipur Cement, C.G on total amount including diesel cost and Shri Raipur cement will raise separate invoice for diesel upon them. Thus, from above it is clear that in the case of Shri Navodit Agarwal, there were two supplies. First, supply of diesel by Shree Raipur Cement to Shri Navodit Agarwal for which an invoice was issued by Shree Raipur Cement. Second, service rendered by Shri Navodit Agarwal of transportation including diesel which now belonged to Shri Navodit Agarwal itself. In such circumstances, the decision appears to have been given. In any case, the Advance Ruling Authority was not apprised on Circular no. 47/27/2018 - GST dated 08.06.2018 and decisions passed in Lear Automotive (supra) and Nash Industries (supra) wherein section 15(2)(b) of CGST Act stands interpreted. Further, interpretation of section 15(2)(b) has not been dealt in this matter. For, all of the above, advance ruling given in the matter of Shri Navodit Agarwal is inapplicable for the present purposes. 9. That lastly, at the cost of repetition, it is submitted that the FOC diesel is not consideration for the Applicant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e B is to be added to the freight charged by the Applicant for the purposes of the Central Goods and Services Tax Act. 2017 ( CGST Act. 2017 ) the Rajasthan Goods and Services Tax Act ( RGST Act, 2017 ) C. PERSONAL HEARING In the matter, personal hearing was granted to the applicant on 11.05.2022 14.06.2022. Advocate, Shri Vivek Sharma Advocate Advocate, Shri Anurag Kalawatiya (Authorised Representative) of applicant appeared for PH. During the PH, they reiterated the submissions already made in the written application. They requested for early disposal of the application. Further, at the time of PH dated 14.06.2022, they submitted their additional submission in support of their application. D. COMMENTS OF THE JURISDICTIONAL OFFICER Comments received from the Deputy Commissioner, State Tax, Circle Suratgarh vide letter dated 04.06.2022 are as under:- 1. Mr. Sunil Giri (applicant), is the Proprietor of M/s. Giri Transport Co. The Applicant is a Goods Transport Agency ( GTA ) having its registered place of business Near Swami Dharmashala, Ward 12, Suratgarh, having GST Registration number 08CRBPG5309N1ZM. 2. The Applicant is about to enter into co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct clearly provides that price actually paid or payable for supply of goods/ services is to be the value of supply. Further, section 15 (2)(b) only includes the amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient and not included in the price actually paid or payable. Hence, this sub-section only applies when the contractual liability is that of the supplier but the same stands paid by the recipient. Section 15(2)(b) clearly provides that any amount that the supplies is liable to pay (in this case service recipient is not at all liable to pay for diesel) but has been incurred by the recipient of supply can only be added. [Since GTA is not liable for the diesel, it cannot be added in value of GTA service]. Authority of Advance Ruling, Chhattisgarh in case of Navodit Agarwal [STC/AAR/10/2018] held that the GST is chargeable on the value of diesel provided by the service recipient to GTA by raising separate bills. It is submitted that the said ruling will not apply to the case under examination as because in that (said) case, consideration was chargeable for the diesel provided by the service recipient by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/trailers listed in Annexure-1 hereto. GTC will undertake transportation activities for ABC and the required trucks/trailers along with the driver and assistant will report at the day/time and place directed by ABC. The trucks/trailers so placed by GTC along with driver and assistance will be required to undertake transportation of the goods in accordance with the instructions of ABC. 5.1.2 GTC is not responsible for loading/unloading of the goods. GTC is to ensure that trucks/trailers report at the designated place of loading/unloading of the goods as per the directions and time allotted by ABC. 5.1.3 The activity of safe transportation is critical, and it is incumbent on GTC to ensure that goods are safely transported from point of origin to point of destination. For this, GTC ensures that it has experienced drivers and assistants who have the capacity to undertake transportation of industrial goods on trucks/trailers listed in Annexure-1 and understand load bearing capacity of the given trucks/trailers, maintenance of speed limit on full load, adequate safeguard measures on bad roads and all other measures warranted for safe transportation of goods. 5.1.4 GTC is strict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net Quantity would be receipted by ABC. the said results obtained at the destination would be final and no dispute in respect thereof would be entertained by ABC. 5.4 RESPONSIBILITIES OE ABC,- 5.4.1 ABC to ensure that goods are available for loading at the stipulated time and place earmarked to GTC for bringing the trucks/trailers. Further, unloading of the goods lakes place at the stipulated time and place instructed by ABC to GTC. 5.4.2 Fuel is the sole responsibility of ABC. ABC ensures that it will fill the truck/trailer with adequate fuel to ensure that its goods stand transported safely. For transportation of the goods, GTC is not responsible for the fuel in any manner. 5.4.3 ABC will provide necessary documents lo the driver which are required to be carried during transportation under GST laws. 5.4.4 Fuel (diesel/any other fuel) used to propel the truck/trailer is not in the scope of work of GTC. Il is agreed between the Parties that fuel which will be consumed during transportation, is in the scope of ABC and would be filled in the truck/trailer by ABC at the point of loading of the goods. 5.4.5 Such fuel shall be filled in the truck/trailer that is eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Government on the recommendation of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. The relevant part of section 15 CGST Act, which is valuation section reads as follows:- Value of taxable supply. 15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) ... (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; ... 10. It is seen that section 15 (2)(b) only includes the amount that the supplier is liable to pay in relation to such supply, but which has been incurred by the recipient and not included in the price actually paid or payable. Hence, trigger of section 15 (2)(b) CGST Act can be said to apply when the contractual liability is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he offices. Although Pretty Paint would have charged more money if it had to also supply the paint, this is not relevant in this particular transaction. 12 It is also seen that the Draft GST law proposed to include the following in section 15 (2) CGST Act the value, appropriated as appropriate, of such goods and/or services as a supplied directly and directly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued . This provision has not been brought in the final enacted section 15 (2) of CGST Act. The Hon ble Supreme Court recently in UOI v. Mohit Minerals Pvt Ltd. 2022 (5) TMI 968 (SC) has held that while interpreting a statute, one has to look into the history of the legislation to understand the full purport of the words used and the mischief sought to be remedied. Thus, the intent of the legislation is required to be seen. Therefore, the present section 15(2)(b) CGST Act cannot be used to include the given transaction since contractual liability on FOC diesel is not being vested on the Applicant. 13. The issue is also revenue neutral inasmuch as even if the value of the free of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and value of GTA service is required to be ascertained accordingly. In the facts of the present application, FOC diesel is not required to be included in the value of GTA service provided by the Applicant since contractual obligation of the said FOC diesel is not on the Applicant. 15. After examining and analysis of submissions of Applicant on Applicability of judicial pronouncements given under a repealed act/another act to the subsequent act/ act under consideration having pari-materia provisions. 15.1 Applicability of judicial pronouncement given under service tax laws (Finance Act, 1994) to similar provisions under the GST Act. Hon ble Madhya Pradesh Appellate Authority for Advance Ruling in case of Bharat Oman Refineries Limited [MP/AAAR/07/2021] has held that - 7. We are of the considered view that the ratio the decision of the hon ble Madras High Court in GE T D India Ltd Vs Deputy Commr. of Central Excise, LTU, Chennai quoted above, is squarely applicable to the present case. Though the said judgment pertains to the Service Tax period we do not find any change in the position of law in this regard after introduction of GST. In view of the above find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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