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Diesel costs for DG set rentals must be included in supply value under Section 15 CGST Act 2017 The AAR held that diesel costs incurred for running DG sets in rental services must be included in the value of supply under Section 15 of CGST Act, 2017. ...
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Diesel costs for DG set rentals must be included in supply value under Section 15 CGST Act 2017
The AAR held that diesel costs incurred for running DG sets in rental services must be included in the value of supply under Section 15 of CGST Act, 2017. The authority determined that reimbursement of diesel expenses constitutes additional consideration for DG set rental services, not separate non-GST supply. Following precedent from a similar ruling, the AAR concluded that diesel cost reimbursement attracts GST at 18% under CGST and state GST provisions as it forms integral part of the rental service value.
Issues Involved: 1. GST applicability on the reimbursement of diesel cost incurred for running DG Set in the course of providing DG rental service.
Issue-wise Detailed Analysis:
1. GST Applicability on Reimbursement of Diesel Cost:
The applicant, a partnership firm engaged in renting DG Sets, sought an advance ruling on whether GST is applicable on the reimbursement of diesel cost incurred for running the DG Set. The applicant has been charging and collecting GST at 18% on both the DG Set hiring charges and the reimbursement of diesel cost.
The recipient of the service contested this, arguing that diesel, being a non-GST good as per Section 9 of the CGST/SGST Act, 2007, should not attract GST. The applicant sought clarity on whether the reimbursement of diesel cost should be subject to GST.
Legal Provisions and Interpretation:
The authority examined Section 15 of the CGST Act, 2017, which defines the value of taxable supply. It mandates that the value of supply shall include 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.
The authority emphasized that the diesel cost is an integral part of the DG Set rental service. Without diesel, the DG Set cannot function, making the diesel cost inseparable from the rental service. The reimbursement of diesel cost is considered an additional consideration for the DG Set rental service.
Precedents and Rulings:
The authority referenced similar rulings, including the Karnataka Authority for Advance Ruling in the case of M/s. Goodwill Autos, which held that the cost of diesel for running DG Sets is additional consideration for the rental service and attracts GST at 18%. Additionally, similar views were upheld in the cases of M/s Gurjinder Singh Sandhu and M/s Vinayak Air Products Pvt Ltd.
Conclusion:
The authority concluded that the reimbursement of diesel cost for running DG Sets is subject to GST at 18% as per Section 15 of the CGST Act, 2017. The diesel cost forms part of the value of supply for the rental service, and thus, GST is applicable.
Ruling:
GST at 18% is applicable on the cost of diesel incurred for running DG Sets in the course of providing DG rental service as per Section 15 of the Central Goods and Services Tax Act, 2017, and the Uttarakhand Goods and Services Tax Act, 2017.
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