2020 (7) TMI 409 - AAR - GST

Inclusion of Free HSD Oil in Service Value under CGST Act: Ruling Analysis

In Re: M/s. Pulluri Mining & Logistics Private Limited

The Authority for Advance Ruling determined that the HSD Oil issued free of cost by the service recipient to the applicant should be included in the value ... Valuation - HSD Oil issued free of cost by the service recipient to the applicant - includible in the value of supply of service or not - HELD THAT:- In the instant case, the service recipient i.e., M/s. Sree Jayajyothi Cements Private Limited is providing diesel to the equipments and vehicles used by the applicant for executing the mining contracts at different places stipulated in the work order. Diesel so provided by the service recipient to the applicant for use in the equipments and vehicles of the applicant forms an important and integral component of this business process, without which the process of excavation of limestone at different mines, transportation and delivery of Limestone to Yanakandla Limestone Hopper belonging to the recipient - As per Section 15 (2) (b) of CGST Act, the value of supply includes 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. 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 is includible in value. Issues involved:- Interpretation of Section 15 of the CGST Act regarding the inclusion of HSD Oil issued free of cost by the service recipient in the value of supply of service by the applicant.Detailed Analysis:The case involved an application filed by a mining and logistics company seeking an advance ruling on whether the HSD Oil issued free of cost by the service recipient should be included in the value of supply of service by the applicant as per Section 15 of the CGST Act. The applicant argued that since the HSD oil was provided free of cost by the service recipient and was not part of the consideration for the services rendered, it should not be included in the value of supply. The applicant contended that as per the work order, the HSD oil was essential for operating heavy equipment and vehicles, and it was provided at no additional cost. The applicant emphasized that they had quoted a comprehensive price for their services excluding the fuel cost, indicating that the value of HSD oil should not be considered in the total price payable. The applicant relied on Section 15(2)(b) of the GST Act, which states that any amount that the supplier is liable to pay but has been incurred by the recipient and not included in the price paid should be considered. The applicant argued that since they were not liable to pay for the HSD oil separately, it should not be included in the value of supply.Upon examination of the relevant provisions of the CGST Act, the Authority for Advance Ruling found that the value of supply includes any amount that the supplier is liable to pay in relation to the supply but has been incurred by the recipient and not included in the price paid. The Authority noted that the HSD oil provided by the service recipient was essential for the applicant's business operations, forming an integral part of the mining process. Therefore, based on Section 15(2)(b) of the CGST Act, the Authority ruled that the HSD Oil issued free of cost by the service recipient to the applicant would indeed form part of the value of supply of service by the applicant. The ruling emphasized the importance of considering all elements essential for the supply of services, even if provided without a separate charge, in determining the value of supply for GST purposes.