Including Fuel Reimbursement in Value of Services under GST

The appellate authority upheld the ruling that the fuel cost reimbursed by customers to M/s. Global Vectra Helicorp Limited must be included in the value of services provided under GST legislation. The appellant's argument that the fuel cost should not be considered as part of the rental services was dismissed, as the authority found that the appellant's arrangement of fuel was integral to the provision of services and did not meet the criteria of acting as a "pure agent." The authority emphasized that under the GST Acts, expenses like fuel reimbursement must be included in the value of supply if certain conditions are not met.

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Issues Involved:
1. Whether the amount towards fuel is required to be included in the value of services provided by the appellant under GST legislation.

Detailed Analysis:

Issue 1: Inclusion of Fuel Cost in Value of Services

The appellant, M/s. Global Vectra Helicorp Limited (GVHL), provides rental services of aircrafts and, under certain conditions, procures Aviation Turbine Fuel (ATF) on behalf of the customers, with the cost being reimbursed by the customers. The appellant argued that the fuel cost should not be included in the value of services for GST purposes as it is reimbursed at actuals and does not constitute consideration for the rental services.

The appellant filed an appeal against the Advance Ruling Order No. GUJ/GAAR/R/21/2020 dated 14.07.2020, which held that the reimbursed fuel cost should be included in the value of services provided by the appellant.

The appellant cited various provisions of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and the Gujarat Goods and Services Tax Act, 2017 (GGST Act, 2017), specifically Section 2(31) defining consideration, Section 9, Section 15, and Rule 33 of the GST Rules, 2017. They argued that the fuel cost does not constitute consideration for the rental services and should be excluded from the value of supply under GST.

However, the appellate authority found that the appellant misinterpreted Section 15(2)(b) of the GST Acts, 2017. The authority noted that the appellant is primarily responsible for arranging fuel except at specified locations where the customer provides it. Therefore, the fuel cost not included in the rental service price must be included in the value of supply as per Section 15(2)(b).

Further, the authority held that the amount charged by the appellant for fuel reimbursement falls under Section 15(2)(c) as incidental expenses. The appellant's activity of arranging/providing ATF is done at the time of or before the supply of rental services, making the reimbursement amount includable in the value of supply.

The appellant's claim of acting as a "pure agent" was also dismissed. The authority noted that the appellant did not fulfill the conditions of Rule 33 of the GST Rules, 2017, which requires that the supplier acts as a pure agent, does not hold title to the goods, does not use the goods for their own interest, and receives only the actual amount incurred. The appellant's arrangement of fuel was found to be for their own interest to enable the provision of rental services, thus failing the pure agent criteria.

The appellant's reliance on various pre-GST era judgments and Circular No. 47/21/2018-GST was also rejected. The authority clarified that the GST Acts, 2017, provide a detailed framework for valuation, which includes the reimbursement of expenses as part of the value of supply if the conditions of Rule 33 are not met.

The authority concluded that the amount recovered as reimbursement for fuel procured for use in the helicopter provided on rent to the customer is required to be included in the value of services provided by the appellant under GST legislation.

Therefore, the appeal filed by M/s. Global Vectra Helicorp Limited was rejected, and the Advance Ruling No. GUJ/GAAR/R/21/2020 was upheld.

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