2025 (11) TMI 107 - AAR - GST

Valuation s.15(1): invoice is transaction value for unrelated sales; related-party supplies with full ITC taxable; GTA to unregistered exempt

In Re: M/s Sri Lakshmi Ganesh Cement and Iron General Stores.

AAR held that valuation under s.15(1) is the transaction value where supply of cement/iron to an unrelated person is for a sole price. Supplies to a ... Valuation of of supply u/s 15 of GST Act, 2017 - supply of cement, iron or both to an unrelated person for which price is the sole consideration - supply of cement, iron or both to M/s. Sri Lakshmi Ganesh Steels, a related person who is eligible to claim input tax credit on the said supply - registered person is liable to pay tax on the services of transportation of goods by the road to an unregistered person or not - applicability of serial no. 18 of N/N. 12/2017-CENTRAL TAX (RATE) dated 28-06- 2017 or Serial no. 21A of N/N. 32/2017 – Central Tax (Rate) dated 13-10-2017 issued u/S 11 of CGST Act, 2017 to the registered person or not in case of services provided to unregistered persons. What is the value of supply U/s 15 of GST Act, 2017 in case of a supply of cement, iron or both to an unrelated person for which price is the sole consideration? - HELD THAT:- As per Section 15(1) of the GST Act, 2017, the value of a supply of goods or services shall be the transaction value i.e., the price actually paid or payable provided the supplier and recipient are not related and the price is the sole consideration. What is the value of supply U/s. 15 of GST Act, 2017 in case of a supply of cement, iron or both to M/s. Sri Lakshmi Ganesh Steels, a related person who is eligible to claim input tax credit on the said supply? - HELD THAT:- Supplies between the related persons with consideration shall constitute as ‘Supply’ like any other transaction. Whereas, the supply made between related persons for inadequate or no consideration is covered under Schedule I of the GST Act. Such transactions shall be treated as ‘Supply’ only if it happens in the course or furtherance of business. Para 2 of Schedule I covers any kind of supplies between related persons or distinct persons when made in the course or furtherance of business - in transactions between related or distinct persons, the invoice value will be accepted as the value of supply under Section 15 if full ITC is available to the recipient. Whether the registered person is liable to pay tax on the services of transportation of goods by the road to an unregistered person or not? If yes, at what rate of tax? - HELD THAT:- In the instant case, the applicant is registered under GST and presently supplying transportation services to unregistered services with out issuing any consignment note or invoice or any other document .Being a registered person the applicant is bound to issue a document by whatever name it is called even for the supplies made to unregistered persons. Further, there may be a situation where the applicant likely to supply the goods to a registered person later. In such a situation being a registered person the applicant has to issue a consignment note or invoice by whatever name called to the recipients either by opting for forward charge or reverse charge . Hence, the applicant will fall under the GTA service - From the description of service in the aforesaid entry, it is evident that the said exemption is exclusively in respect of Services provided by a goods transport agency to an unregistered person, including an unregistered casual taxable person, other than certain specified recipients. Hence, the applicant is not liable to pay tax as per sl no .21A of Not/N. 12/2017-CENTRAL TAX (RATE) dated 28-06- 2017 as amended by N/N. 32/2017 – Central Tax (Rate) dated 13-10-2017 for the supplies made to the unregistered persons. Whether serial no. 18 of Notification No. 12/2017-CENTRAL TAX (RATE) dated 28-06- 2017 or Serial no. 21A of Notification no. 32/2017 – Central Tax (Rate) dated 13-10-2017 issued under section 11 of CGST Act, 2017 applicable to the registered person or not in case of services provided to unregistered persons? - HELD THAT:- The applicant is not liable to pay tax as per sl no .21A of N/N. 12/2017-CENTRAL TAX (RATE) dated 28-06- 2017 as amended by N/N. 32/2017 – Central Tax (Rate) dated 13-10-2017 for the supplies made to the unregistered persons. ISSUES PRESENTED AND CONSIDERED 1. Whether the value of supply under Section 15 of the GST Act, 2017 for supply of cement and iron to an unrelated person for which price is the sole consideration is the transaction value. 2. How the value of supply under Section 15 is to be determined where the supply of cement and iron is to a related person who is eligible to claim full input tax credit. 3. Whether a registered transporter who carries goods by road for predominantly unregistered persons (farmers/individuals), without issuing consignment notes and without assuming lien, is liable to pay GST on such transportation services and, if liable, at what rate. 4. Whether Notification No. 12/2017 (serial no. 18) or Notification No. 32/2017 (serial no. 21A) exempting services by a Goods Transport Agency (GTA) to unregistered persons applies to the registered transporter in the facts presented. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Transaction value for supplies to unrelated persons Legal framework: Section 15(1) provides that the value of a supply shall be the transaction value - the price actually paid or payable - where supplier and recipient are not related and the price is the sole consideration. Precedent treatment: No judicial precedents were invoked; determination proceeds from statutory text and its plain meaning. Interpretation and reasoning: The Court accepts the statutory conditions: (i) absence of relatedness as defined in the Act, and (ii) price being the sole consideration. Where both conditions are satisfied, the mutually agreed price is the value of supply. Ratio vs. Obiter: Ratio - the holding that transaction value is the value of supply under Section 15(1) where supplier and recipient are unrelated and price is sole consideration. Conclusion: Transaction value (price actually paid or payable) is the value of supply for sales of cement and iron to unrelated persons when price is the sole consideration. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Valuation for supplies to related persons eligible for full ITC Legal framework: Section 15 read with Rule 28 of the CGST Rules governs valuation where supplier and recipient are related persons; Schedule I defines supplies between related/distinct persons. Rule 28 prescribes open market value, value of like kind and quality, cost plus, and alternative provisos including 90% rule and invoice value deemed to be open market value where recipient is eligible for full input tax credit. Precedent treatment: No case law cited; statutory scheme applied as enacted. Interpretation and reasoning: Supplies between related persons are treated as supply and valuation follows Rule 28. The first preference is open market value; if unavailable, value of like kind and quality; then cost plus methods. However, where the recipient is eligible for full input tax credit, the invoice value is expressly deemed to be the open market value (second proviso to Rule 28(1)). Therefore, when recipient can claim full ITC, the invoice value is accepted as value of supply. Ratio vs. Obiter: Ratio - for transactions between related persons where the recipient is eligible for full input tax credit, the invoice value shall be deemed to be the open market value and thus be accepted as the value of supply under Section 15 read with Rule 28. Conclusion: Invoice value is the value of supply for supplies of cement and iron to a related person who is eligible to claim full input tax credit (subject to Rule 28 requirements). ISSUE-WISE DETAILED ANALYSIS - Issue 3: Tax liability of registered transporter supplying road transport to unregistered persons Legal framework: Exemption entries in Notifications governing GST rates - in particular, the definition and tax treatment of services by a Goods Transport Agency (GTA) and the specific exemption entry for services provided by a GTA to unregistered persons (serial no. 21A/Notification No. 32/2017). The statutory and rule definitions of GTA, and reference to prior Service Tax definition of consignment note under Rule 4B (Service Tax Rules) for identifying a consignment note. Precedent treatment: No judicial authority relied upon; analysis based on notification text and definitional provisions. Interpretation and reasoning: The exemption entry applies specifically to services provided by a GTA to an unregistered person. The defining characteristic of a GTA in the notification is provision of transport of goods by road and issuance of a consignment note by whatever name called. Although the word 'consignment note' is not defined in GST, the Service Tax rule definition illustrates the typical contents and function (serially numbered document evidencing receipt for transport, detailing consignor/consignee, goods carriage registration, details of goods, origin/destination, and liable person). The applicant, though registered, did not issue any consignment note or assume lien; he issued only a bill and claimed consignor bears risk. However, being a registered person making transportation supplies, he is required to issue a document (invoice/consignment note) even for supplies to unregistered persons and may at times supply to registered persons later. Issuance of a consignment note and assumption of lien are indicators that the supplier is a GTA. Where a supplier satisfies GTA characteristics and provides services to unregistered persons, Serial No. 21A grants nil rate/exemption subject to its exclusions. The ruling finds that the exemption entry applies to services provided by a GTA to unregistered persons; on the facts the applicant will fall under GTA service because he is a registered supplier of transport services and must issue documentary acknowledgement for supplies; accordingly the services to unregistered persons attract the exemption under serial no. 21A. Ratio vs. Obiter: Ratio - services provided by a GTA to unregistered persons are exempt under serial no. 21A; a registered transporter of goods by road who issues requisite documentary acknowledgment or otherwise falls within the GTA definition and supplies to unregistered persons is covered by the exemption. Observations on consignment note as sine qua non and on issuance obligations are applied to facts (binding ratio as to exemption application); ancillary observations on consignment note definition are interpretative guidance (obiter-ish). Conclusion: The registered transporter is not liable to pay GST on road-transport services provided to unregistered persons under serial no. 21A of Notification No. 32/2017 (as inserted/amended), since the exemption applies to services by a GTA to unregistered persons; accordingly, no tax liability arises on the facts presented. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Applicability of Notifications (serial no. 18 of Notification No.12/2017 and serial no.21A of Notification No.32/2017) to the registered person for supplies to unregistered persons Legal framework: Notification entries creating exemptions; definition of GTA in Notification No.12/2017 (serial no. 18) and the specific exemption for GTA services to unregistered persons in Notification No.32/2017 (serial no. 21A). Precedent treatment: No case law cited; statutory and notification texts construed. Interpretation and reasoning: Serial no. 18 exempts 'services by way of transportation of goods' except services of GTA or courier agency; serial no. 21A specifically exempts services by a GTA to unregistered persons subject to enumerated exceptions. The notifications together show that the tax treatment depends on whether the supplier is a GTA. The ruling applies serial no. 21A to exempt GTA services to unregistered persons. Where a supplier is not a GTA (i.e., does not issue consignment notes and does not assume lien), the general exemption in serial no. 18 may apply (services by way of transportation of goods are exempt other than GTA/courier agency). On the facts, the Tribunal treats the registered person as falling within GTA classification for practical purposes and therefore applies serial no. 21A; the outcome is that services to unregistered persons are exempt in either analysis when the supplier is not a GTA (serial no.18) or when he is a GTA supplying to unregistered persons (serial no.21A). Ratio vs. Obiter: Ratio - notification-based exemptions apply as per the supplier's classification: if not a GTA, serial no. 18 exempts transport services; if a GTA, serial no. 21A exempts GTA services to unregistered persons; both lead to no tax liability on the facts. Observations about the consignment note being sine qua non for GTA classification are interpretative guidance. Conclusion: Notification No.12/2017 (serial no. 18) and Notification No.32/2017 (serial no. 21A) apply such that the registered person, in the factual matrix presented, is not liable to pay GST on transportation services provided to unregistered persons; the ruling refers specifically to serial no.21A as the applicable exemption.