FUEL OIL SUPPLIED TO VESSELS. SUPPLY OR SERVICE ?

[Mehul Pandya]

DEAR EXPERTS,

WE ARE INTO AGREEMENT FOR SUPPLY OF FUEL OIL TO VESSELS WHICH IS ALSO CALLED AS BUNKERING.

THEREFORE WE ARE PURCHASING FUEL OIL FROM THE MARKET. FOR SUPPLY OF THIS FUEL INTO THE VESSELS WE ARE AVAILING SOME SERVICES LIKE TRANSPORTATION, CARGO HANDLING, PORT RELATED SERVICES ETC. WE ARE PAYING DIFFERENT PORT RELATED CHARGES WHICH ALSO INCLUDES SERVICE TAX. THEREFORE WE ARE ADDING ALL THIS SERVICES AS A COST OF MATERIAL OF FUEL AND RAISING BILL TO OUR CUSTOMERS. WE ARE ALSO PAYING SALES TAX ON THE SAME. BUT DURING THE SCRUTINY DEPARTMENT HAS RAISED THE QUERY THAT WE HAVE TO ISSUE SEPARATE FOR FUEL AND SERVICES. WE CANT CLUB THE SAME.THEY ALSO TOLD TO CHARGE SERVICE TAX ON SERVICE PART. I CAN NOT UNDERSTAND THAT HOW I AM LIABLE TO PAY SERVICE TAX WHICH IS NOT PROVIDED BY ME. THEREFORE IS THERE ANY PROVISION TO CLEAR THIS ISSUE.

[Ganeshan Kalyani]

In my view there is no service being provided by you. You are supplying fuel and VAT shall be applicable on sale of fuel. If vat has been paid then service tax should not be demanded.

Whether you are providing any service in addition to supply of fuel which may be referred by the authority.

AI Summary

Supply of fuel oil treated as sale subject to VAT; ancillary port services do not automatically attract separate service tax. Supply of fuel oil to vessels (bunkering) is characterised as a sale of goods subject to VAT, while associated transportation, cargo handling and port charges are being recovered as part of the fuel cost. The tax authority required separate invoices for fuel and services and sought service tax on the service component. The advised position is that no separate service is provided by the supplier and VAT should preclude a separate service tax demand, subject to whether any distinct services are actually supplied.