reiumbursment on supply of diesel

[yashpal madan]

We are providing Generator Set to banks on monthy rental basis.some banks are paying fix amount including supply of diesel,maintenence & operation of set and we charge GST @18% on fix amount.
Some banks are paying rent of generator @10000 p.m which include operation & maintenence plus diesel consumption @ 8 liter per hour at market diesel rates as per running of Generatror depending on power supply situation.
We generate two bills one for rent of generator and second for reimbursement of diesel.
On rent bill we charged 18%GST and we are not charging GST on reimbursement of diesel as petrolieum product are not in GST.
Please suggest me this is right or we should charge GST on reimbursement of diesel bill as bank are not ready to pay GST on diesel

[KASTURI SETHI]

In the situation explained by you, reimbursement is an expense against taxable supply. It is taxable and covered under the definition of Section 15 (2)(c) of CGST ACT, 2017.

[KASTURI SETHI]

You cannot take the ground that diesel is exempted. Treat it as an expense against taxable supply and expense incurred on diesel will form part of taxable value of Supply.

[Himansu Sekhar]

First thing you are not a dealer of diesel and not engaged in sale of fuels. You are providing a service. This expenditure on account of Diesel charges is indispensable and inevitably incurred to provide taxable service and hence, essentially forms part of value of taxable service.

If tomorrow, diesel comes under GST, and the rate of GST if happens to be more, you will not be asked to pay the GST applicable on Diesel. You will be asked to pay GST treating it as a composite supply, The main supply will be the essence of the entire composite supply.

Kasturi sir is correct.

[Himansu Sekhar]

It is better to ask for a clarification to the Deptt.

[YAGAY andSUN]

Providing of tangible goods for rent/lease is taxable under GST Regime.

[Alkesh Jani]

Dear all Experts,

Can we review on the basis of "pure agent" in second scenario.

Thanks in with regards,

[Himansu Sekhar]

A “pure agent” means a person who:
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both

(b) neither intends to hold nor holds any title to the goods or services or both so procured or provided as pure agent of the recipient of supply
(c) does not use for his own interest such goods or services so procured
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for the supply he provides on his own account
The supplier would have to satisfy the following conditions (in addition to the condition required to be satisfied to be considered as a pure agent)for exclusion from value:
(i) The supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party on authorization by such recipient

(ii) The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service

(iii) The supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account In case the conditions are not satisfied, such expenditure incurred shall be included in the value of supply under GST.

It appears the supply of diesel do not satisfy the above criteria

[KASTURI SETHI]

The concept of '''pute agent" is not applicable here.

[YAGAY andSUN]

Yes, Pure Agent is a Different Animal in GST Regime. 

AI Summary

Taxable value inclusion of reimbursements: diesel costs incurred to provide rental service must be part of the service value. Diesel reimbursements paid to a supplier of rented generator sets are expenses incurred in providing a taxable service and must be included in the taxable value under valuation rules. Diesel being outside the tariff does not exclude it from value when it is an expense component of the supply. The pure agent exclusion applies only if strict conditions are met-contractual appointment, no title, recipient authorization, separate invoice disclosure, and that the procured supplies are additional-otherwise such reimbursements are includible.