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TMI Blog2024 (10) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... to the obvious conclusion that the value of the goods / materials provided by the service recipient free of charge is not to be included while arriving at the gross amount simply because no price is charged by the assessee / service provider from the service recipient in respect of such goods / materials. The service tax has to be calculated on the gross amount that was charged from the service recipient. UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT ] was another case where the Supreme Court was examining the validity of the expenditure / cost incurred by the service provider in the course of providing taxable services. The Supreme Court in this case also was examining Section 67 of the Finance Act, 1994 which relates to the expenditure / cost incurred by the service provider in the course of providing taxable services. In para 26 of the above said judgment, the Supreme Court held that the value of free supplies of diesel and explosives in respect of service of Site Formation and Clearance Service can be included for the purpose of assessment to service tax under Section 67 of the Act. The Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 3. Petitioner is a sole proprietor of the said firm and is duly registered under the Uttarakhand Goods and Service Tax Act, 2017. His place of business is 1st Floor, Shop No. 72, Avdhoot Mandal, Haridwar, Uttarakhand. 3) A proposed draft agreement (Annexure-2 to the writ petition) was entered between the petitioner and the service recipient. The salient features of the proposed draft agreement are as under : (i) Scope: - Petitioner will transport the goods belonging to the service recipient from its factory to the specified destination within in a specified period (reasonable) of time taking specified route. Petitioner will be assuming transit risk of the goods being transported. (ii) Exclusivity:- The vehicle, deployed by the petitioner, shall exclusively transport the goods belonging to the service recipient for the trip, i.e., the vehicle deployed by the petitioner for the particular trip cannot transport the goods for any other person. (iii) Consignment Note: - Petitioner will issue consignment note, serially numbered, signifying the receipt of goods from service recipient for the purposes of transportation. The consignment note, inter alia, will contain details of the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 30.01.2023, the learned Appellate Authority for Advance Ruling Uttarakhand upheld the earlier order dated 26.09.2022, passed by Goods and Service Tax Advance Ruling Authority Uttarakhand by observing as under : The value of diesel supplied / filled by the service recipient in the vehicle(s) provided by the applicant will form part of the value of GTA service and the same will attract GST in terms of Section 15 of the CGST Act, 2017 and Uttarakhand Goods and Service Tax Act, 2017. 7) The petitioner has come up in appeal against the above said order. 8) The petitioner has referred to Section 7(1)(a) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act, 2017). The same is reproduced as under : 7. Scope of supply. (1) For the purposes of this Act, the expression ―supply includes (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; 9) As per above said section, the supply includes all forms of supply of goods or services made or agreed to be made for a consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. 13) As per Section 15 (2) (b) of the CGST Act, 2017, there has to be a contract or one has to enter into contract or be a part of contract in some capacity as to who is liable to pay for the supply of fuel. As per the agreement (Annexure-2), the liability to pay for the cost of the fuel was never on the petitioner-transporter. He was only to be paid freight charges under the GTA Rules 2017, and in this backdrop, the cost of fuel could not be added as per Section 15 (2) (b) of the CGST Act, 2017. Since as per the agreement (Annexure-2) the fuel has to be procured and to be supplied by the service recipient to the petitioner, the value of fuel cannot be added to the value of freight charges charged by the petitioner . 14) Section 2(31) of the CGST Act, 2017 defines consideration as under : `` Consideration in relation to the supply of goods or services or both includes (a) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Nash Industries (I) Pvt. Ltd. [2019 (3) TMI 435 Appellate Authority for Advance Ruling, Karnataka] and AAR Maharashtra in In Re M/s Lear Automotive India Private Limited [2018 (12) TMI 766 Authority for Advance Ruling, Maharashtra]. 19) In all the above said judgments it has been consistently held that value of diesel filled free of cost (FOC) by the service recipient is not includable in the value of GTA service proposed to be provided by the applicant. It is further stated that the petitioner has paid the GST as a transporter, and the whole of it is allowable as credit to the recipient of service as input tax credit (ITC) under Section 16 of the CGST Act, 2017. Such ITC is usable by the recipient of service for payment of its own GST on the supplies made by it. There will be no financial impact on the recipient of service, and even for the exchequer there will be no financial impact since whole of the GST paid by the petitioner-transporter on freight will be allowable as ITC to the recipient and such credit is then utilizable by the recipient for payment of GST on its own supplies, net receipts by the exchequer will be the same, whether or not fuel cost is included in the frei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecipient of the supply and not included in the price actually paid or payable for the goods or services or both shall be included in the value of the supply. As per Section 15 (2) (b) all ingredients of a supply are required to be looked into while arriving at the value of a particular supply. The claims of the petitioner have been rightly rejected on the grounds that the GTA includes transport of goods by road and issuance of consignment note and the essential ingredients in the transport of goods and issuance of consignment note would be the presence of the goods for the purpose of transporting them plus the provision of a movable vehicle, the presence of a driver to drive the vehicle, fuel for the vehicle and such other assets / services, taken as a whole and at the same time and together, to meet the requirements of the service. The transportation of goods cannot take place by providing a static asset, whether on rent or otherwise. It also cannot take place simply by hiring out or renting of a movable asset (such as a truck) that is not able to move because of a mechanical problem or due to the absence of a driver or of fuel. With regard to the instant case it is further stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, the value on which service tax is payable has to satisfy the following ingredients : (a) Service tax is payable on the gross amount charged the words gross amount only refers to the entire contract value between the service provider and the service recipient. The word gross is only meant to indicate that it is the total amount charged without deduction of any expenses. Merely by use of the word gross the Department does not get any jurisdiction to go beyond the contract value to arrive at the value of taxable services. Further, by the use of the word charged , it is clear that the same refers to the amount billed by the service provider to the service receiver. Therefore, in terms of Section 67, unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable. (b) The amount charged should be for for such service provided Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore or less than the consideration paid as quid pro qua for rendering such a service. 25) Finally, the Supreme Court in the above said judgment has held that the value of free supplies of diesel and explosives in respect of service of Site Formation and Clearance Service can be included for the purpose of assessment to service tax under Section 67 of the Act. The Supreme Court further held that the value of such material which is supplied free by the service recipient cannot be treated as gross amount charged and it is not the consideration for rendering the services. In this backdrop, the value of free supplies of diesel and explosives would not warrant inclusion while arriving at the gross amount charged on the service tax to be paid, and all the appeals filed by the Union of India were dismissed. 26) The Supreme Court in the judgments referred to hereinabove has consistently held that where diesel is filled free of cost (FOC) by the service recipient and is not included in the value of GTA service, then the cost of fuel cannot be added to the payment made by the service recipient to the transporter, and further GST be charged from the transporter. 27) Recently, the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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