Diesel costs for DG Sets rentals taxed at 9% under CGST & KGST

The ruling determined that the diesel cost incurred for running DG Sets in providing rental services constitutes additional consideration for the supply of DG Sets on rent, attracting CGST and KGST at 9%. The reimbursement of diesel costs was deemed part of the consideration for the services provided, subject to taxation at a lower rate compared to the initial tax payment on leasing charges.

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Issues:
1. GST applicability of cost of diesel incurred for running DG Set in providing DG Rental Service.

Analysis:
The applicant, a partnership firm engaged in the business of leasing DG Sets, sought an advance ruling on the GST applicability of diesel costs incurred for running DG Sets in providing rental services. The applicant discharged tax at 18% on DG Set hiring charges and reimbursement of diesel costs. However, a recipient of services objected to the tax on diesel reimbursement, claiming diesel falls outside GST purview as a non-GST good. The applicant argued that reimbursable expenses should be included in the value of taxable services, citing a previous court ruling. During the personal hearing, the applicant reiterated the facts.

The Authority considered the submissions and relevant provisions of the CGST and KGST Acts. It observed the applicant's tax payments on leasing charges and diesel reimbursement. The key question was analyzed under Section 15(1) of the CGST Act, which defines the value of supply. The reimbursement of diesel costs was deemed part of the consideration under Section 2(31) of the Acts. The contract between the applicant and the recipient included fixed rent and variable diesel charges as part of the same consideration for supplying DG Sets on hire. The diesel reimbursement was considered an additional consideration for the rental service, subject to CGST and KGST at 9%.

Therefore, the ruling stated that the diesel cost incurred for running DG Sets in providing rental services constitutes additional consideration for the supply of DG Sets on rent, attracting CGST and KGST at 9%.

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