Suppliers correctly include input GST in transaction value under Section 15 CGST Act 2017

The AAR, Uttarakhand ruled that suppliers correctly included GST paid on inputs as part of transaction value under Section 15 of CGST Act, 2017. The Authority held that GST paid by suppliers on vendor supplies constitutes a cost component forming part of the transaction value for work contracts involving equipment supply, installation and civil work. This does not amount to double charging of GST but represents the actual price payable. The valuation method adopted by the suppliers was found compliant with GST provisions and CBEC clarifications regarding compulsory inclusions in taxable value.

---

---

Issues:
Double charging of GST in draft estimates submitted by entities for works contract.

Analysis:
The application sought an advance ruling on the correctness of double charging of GST in draft estimates by two entities involved in works contracts. The applicant highlighted that these entities were not eligible for Input Tax Credit (ITC) and charged GST twice - firstly on the value from vendors and then on the total value including other components. The issue was whether this double charging was correct under the present GST regime.

The Authority for Advance Rulings admitted the application under Section 97(2)(c) of the CGST/SGST Act, 2017. The applicant presented their case during a personal hearing, emphasizing the double charging of GST by the entities. The concerned officer also supported the applicant's request for a decision on the merits.

The Authority examined the provisions of Section 15 of the CGST Act, 2017, which determines the value of taxable supply. It clarified that the transaction value includes various components such as taxes, fees, charges, and expenses. The value is based on the price actually paid or payable when the supplier and recipient are unrelated, and price is the sole consideration.

Referring to relevant circulars and FAQs, the Authority reiterated that transaction value is the price paid for the supply of goods or services. In this case, the entities correctly included all cost components, including GST paid to vendors, in determining the transaction value for the works contract. The inclusion of additional charges was in accordance with the agreement between the parties.

The Authority concluded that the GST paid by the entities on supplies received from vendors was a cost component forming part of the transaction value. Therefore, the transaction value arrived at by the entities, inclusive of GST, was in compliance with the GST Act, 2017. Consequently, the double charging of GST in the draft estimates for works contracts was deemed correct and in line with the statutory provisions.

In the ruling, the Authority affirmed that the component of GST in the draft estimates submitted by the entities for the works contract was a legitimate cost forming part of the transaction value. It was considered the price actually payable for the supply of goods and services, aligning with the provisions of the GST Act, 2017.

---