GST applies to entire bill amount including rental, night charges, and fuel costs for vehicle hire services under Section 15 The AAR Uttarakhand ruled that GST must be charged on the entire bill amount including monthly rental, night charges, and fuel costs on mileage basis for ...
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GST applies to entire bill amount including rental, night charges, and fuel costs for vehicle hire services under Section 15
The AAR Uttarakhand ruled that GST must be charged on the entire bill amount including monthly rental, night charges, and fuel costs on mileage basis for motor vehicle hire services. The Authority held that under Section 15 of CGST Act 2017, any amount the supplier is liable to pay in relation to supply, including reimbursements incurred by the recipient, forms part of the taxable value. The comprehensive contract for vehicle hire services with varying consideration based on kilometers traveled makes fuel and maintenance reimbursements additional consideration attracting GST on total value, not just monthly rental.
Issues Involved: 1. Determination of the liability to pay tax on services. 2. Valuation of the supply of services.
Summary:
Issue 1: Determination of the liability to pay tax on services
The applicant, M/s Uttarakhand Public Financial Strengthening Project, sought an advance ruling on whether the service provider should charge GST on the whole amount of the bill (monthly rental + night charges + fuel on mileage basis) or only on the monthly rental (excluding night charges + fuel on mileage basis). The application was admitted under Section 97(2)(c) of the CGST/SGST Act, 2017.
Issue 2: Valuation of the supply of services
The applicant receives motor vehicle hire services including fuel charges from service providers M/s Baba Tour & Travel and M/s Rajeshwari Travel. While M/s Baba Tour & Travel charges GST @ 5% on the whole amount of the bill, M/s Rajeshwari Travel charges GST @ 5% only on the monthly rent component, excluding fuel charges. The applicant's agreement terms state that GST and cost of diesel will be reimbursed separately, and the second party shall arrange for fuel and maintenance of vehicles.
The Authority for Advance Rulings examined the issue under Section 15 of the CGST Act, 2017, which mandates that the value of supply shall include any amount the supplier is liable to pay in relation to such supply but incurred by the recipient. The Authority observed that the supply of motor vehicle hire services inherently includes the cost of fuel as it is essential for the operation of the vehicle. Thus, the reimbursement of expenses for fuel is considered additional consideration for the provision of services and attracts GST on the total value.
The Authority referenced previous rulings, including the Karnataka Authority for Advance Ruling in the case of M/s. Goodwill Auto's, which held that the cost of diesel incurred for running DG Set in the course of providing DG Rental Service is additional consideration for the supply.
Ruling:
The service provider has to charge GST on the whole amount of the bill, which includes monthly rental, night charges, and fuel on mileage basis.
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