2026 (3) TMI 395 - HC - GST

Free-supplied materials excluded from GST valuation-components provided without consideration are not added to taxable value.

Materials supplied free of cost by service recipients for manufacture of site-mix/ready-mix concrete are not includable in the value of the taxable ... Valuation of taxable supply - value of goods supplied free of cost - reversal of input tax credit - Whether the value of the material i.e., cement, admixture and waterproofing material, which is supplied free of cost to the petitioner, is exigible to tax or not. Value of goods supplied free of cost not includable in value of taxable supply - HELD THAT:- The Court applied settled law, including the reasoning in Commissioner of Service Tax v. Bhayana Builders (P) Limited [2018 (2) TMI 1325 - SUPREME COURT] and Union of India v. Intercontinental Consultants and Technocrafts Pvt. Ltd [2018 (3) TMI 357 - SUPREME COURT], and the GST Policy Wing Circular No.47/21/2018-GST, to conclude that materials supplied free of cost by the service recipient do not form part of the consideration charged by the service provider. The Circular clarified that where components required for manufacture are provided free of cost by the owner, their value is not to be added while computing the value of supply under the valuation provisions. Consistent with the cited precedents and the Circular, the Court held that the value of cement, admixture and waterproofing material supplied free of cost to the petitioner cannot be included in the value of the site mix/ready mix concrete for taxation purposes. The Joint Commissioner's levy on that value was therefore held to be legally unsustainable. [Paras 12, 13, 14] The value of materials supplied free of cost by the service recipients is not exigible to tax; the levy made by the Joint Commissioner on that value is unsustainable and set aside. Final Conclusion: Writ petition allowed; impugned order levying tax on materials supplied free of cost set aside. Amount deposited in terms of the interim order shall be refunded. No order as to costs. Issues: Whether the value of materials supplied free of cost by service recipients to a service provider for manufacture of site mix/ready mix concrete is exigible to GST and includable in the value of the taxable supply.Analysis: The question was examined in light of Section 15(2)(b) of the Central Goods and Services Tax Act, 2017 and Circular No. 47/21/2018-GST. The Court relied upon settled precedents holding that where goods/materials are supplied free of cost by the service recipient and no consideration is charged by the service provider for those goods/materials, such value does not form part of the gross value of the taxable supply. The Circular clarifies that components provided free of cost by the owner/manufacturer do not constitute supply for consideration and are not to be added to the value of the supply under Section 15(2)(b).Conclusion: The value of materials supplied free of cost by the service recipients is not exigible to GST and is not includable in the value of the taxable supply. Decision is in favour of the assessee.