Cement, iron sold to unrelated buyer for sole consideration valued as transaction value under s.15(1); related-party pricing uses Rule 28
AAR held that where cement/iron is supplied to an unrelated person for a price that is the sole consideration, value is the transaction value under s.15(1). Supplies to a related person who can claim full ITC will be valued at the invoice price; if related-party pricing is not at arm's length, value is determined per Rule 28 (open market value, value of like kind/quality, cost plus 10%, then residual methods). A registered transporter must issue a consignment note/invoice even for unregistered recipients; supplies of road transportation to unregistered persons are not liable to tax under the cited notification entry (applicant not liable).
ISSUES PRESENTED AND CONSIDERED
1. Whether the value of supply of cement and iron to an unrelated person, where price is the sole consideration, is the transaction value under Section 15(1) of the GST Act.
2. Whether the value of supply of cement and iron to a related person who is eligible for full input tax credit is the invoice value under Section 15 read with Rule 28 of the CGST Rules.
3. Whether a registered transporter who provides road transportation of goods to unregistered persons (and does not issue consignment notes or assume lien) is liable to pay GST on such services; if liable, at what rate.
4. Whether Notification entries (exemption entries for transport services) including serial no. 18 of Notification No.12/2017 and serial no. 21A of Notification No.32/2017 apply to a registered person providing transport services to unregistered persons.
ISSUE-WISE DETAILED ANALYSIS
Issue 1 - Value of supply to unrelated person where price is sole consideration
Legal framework: Section 15(1) of the GST Act provides that the value of a supply shall be the transaction value, i.e., the price actually paid or payable where supplier and recipient are not related and price is the sole consideration.
Precedent treatment: No judicial precedents are cited or relied upon in the text; the Authority applies the statutory text directly.
Interpretation and reasoning: The Authority applies the plain language of Section 15(1): when parties are unrelated and money is the only consideration, the mutually agreed price constitutes the taxable value. The ruling reiterates the two conditions inherent in Section 15(1) - absence of a related-party relationship and price as sole consideration - and concludes that transaction value is determinative in such cases.
Ratio vs. Obiter: Ratio - establishes binding application of Section 15(1) to transactions matching those factual conditions.
Conclusion: Value of supply to an unrelated person where price is sole consideration = transaction value (price actually paid or payable under Section 15(1)).
Issue 2 - Value of supply to related person eligible for full input tax credit
Legal framework: Section 15(4) (value where Section 15(1) not determinative) and Rule 28 of the CGST Rules govern valuation between related persons or distinct persons; Rule 28 sets a hierarchy (open market value; value of like kind and quality; application of rules 30/31) and contains provisos including (i) option of supplier to take 90% of recipient's onward selling price where goods intended for further supply and (ii) invoice value deemed to be open market value where recipient is eligible for full input tax credit.
Precedent treatment: No precedents cited; the Authority applies statutory rules and provisos literally.
Interpretation and reasoning: The Authority explains that supplies between related persons are treated as 'supply' (including under Schedule I where applicable) and that Rule 28 prescribes valuation methods when transaction value is not appropriate. Emphasis is placed on the second proviso to Rule 28(1): where recipient is eligible for full input tax credit, the invoice value shall be deemed to be the open market value.
Ratio vs. Obiter: Ratio - where recipient is eligible for full ITC, invoice value will be accepted as the value of supply between related or distinct persons under Section 15 read with Rule 28.
Conclusion: Value of supply to a related person who is eligible to claim full input tax credit = invoice value (per Rule 28 proviso). Cross-reference: follows and depends on Rule 28 and Section 15 interplay described above.
Issue 3 - Tax liability of registered transporter for road transportation services to unregistered persons (factual posture: no consignment note, consignor bears risk)
Legal framework: Notification entries exempting certain road transport services (Notification No.12/2017 - entry for transportation of goods; Notification No.32/2017 - entry 21A exempting services by a goods transport agency to unregistered persons) and the definition of "goods transport agency" in the relevant notification (issue of consignment note as characteristic). Reference is made to the Service Tax Rules definition of consignment note for contextual understanding.
Precedent treatment: No judicial precedent is cited; the Authority treats the notifications and statutory/administrative definitions as determinative.
Interpretation and reasoning: The applicant argued that issuance of a consignment note (and assumption of lien) is a sine qua non for classification as a goods transport agency (GTA); therefore, in absence of consignment notes and lien the service is not GTA and is exempt. The Authority observes that a registered person making supplies to unregistered persons is nonetheless required to issue a document (consignment note/invoice) and that issuance of such document and the possibility of future supplies to registered persons may bring the supplier within the GTA description. The Authority concludes that, on the statutory scheme and notifications, services provided by a GTA to unregistered persons are exempt under entry 21A; and because a registered transporter is obliged to issue documents and may supply to registered persons, the transporter will fall within GTA services and benefit from the exemption under serial no. 21A for supplies to unregistered persons. The Authority thus finds no tax liability for the registered person for supplies to unregistered persons under the noted exemption entry.
Ratio vs. Obiter: Ratio - interpretation that services by a goods transport agency to unregistered persons are exempt under serial no. 21A; and that a registered transporter who falls within the GTA description (by issuing documents/consignment notes or being otherwise a GTA) is covered by that exemption when supplying unregistered persons. Obiter - discussion of the Service Tax Rules definition of consignment note and the statement that issuance of consignment note is sine qua non (applicant's contention) is discussed but the Authority emphasizes the obligation on a registered person to issue documents and the practical possibility of supplies to registered persons.
Conclusion: No GST liability for the registered transporter on transportation services provided to unregistered persons by reason of serial no. 21A of Notification No.12/2017 as amended by Notification No.32/2017; the entry applies to services by a GTA to unregistered persons and a registered transporter who falls within the GTA description will be covered by the exemption for such supplies.
Issue 4 - Applicability of exemption entries (serial no. 18 of Notification No.12/2017 and serial no.21A of Notification No.32/2017) to a registered person providing services to unregistered persons
Legal framework: The description and conditions of the exemption entries (serial no.18 and serial no.21A) in the relevant notifications issued under the CGST Act determine applicability; entry 21A expressly addresses services by a GTA to unregistered persons and specifies exclusions.
Precedent treatment: None cited.
Interpretation and reasoning: The Authority construes the notification language to mean that the exemption (entry 21A) is available for services provided by a goods transport agency to unregistered persons (subject to specified exclusions). Given the Authority's conclusions on Issue 3 that a registered transporter who meets the GTA criteria will be covered by this entry for supplies to unregistered persons, the notifications are held applicable to such registered persons in the described factual matrix.
Ratio vs. Obiter: Ratio - notification entry 21A applies to services by a GTA to unregistered persons (and therefore to a registered person who is a GTA and supplies such services); the applicability is determined by the statutory/notification definitions and conditions. Obiter - broader commentary on issuance of consignment notes and lien is ancillary.
Conclusion: Serial no. 21A (as inserted/amended) applies to services by a GTA to unregistered persons; accordingly, the exemption entries are applicable to a registered person who is a GTA supplying transport services to unregistered persons, resulting in no tax liability for such supplies under the stated entry. Cross-reference: This conclusion follows and amplifies the finding under Issue 3.
TaxTMI 
AI Drafter ✕
TaxTMI 
