AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 585
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....ication No.11/2017-Central Tax (Rate) dated 28.6.2017 (Charter Hire Services). Under the charter hire services entered into by the applicant with various customers, the applicant is responsible for operating and maintaining the aircrafts. The applicant employs experienced and qualified pilots and qualified engineering crew in accordance with aviation standards and ensures that the Aircrafts are available and fully operational during the term of the contract. Aviation Turbine Fuel (ATF) is required for flying the Aircrafts. While in terms of the contracts, the applicant agreed to provide rental services of aircraft (with or without operator) in respect of the ATF, it was agreed that provision of the same for the purpose of flying of the aircrafts would be the responsibility of the Customers. However, at locations where the customer is unable to provide the fuel, in order to ensure continuity of flying, the contract requires GVHL to procure the fuel on behalf of the Customer and subsequently the cost of the fuel is reimbursed by Customer at actual (without charging any mark-up). GVHL undertakes the activity of procurement of fuel as a 'pure agent'. 2. The applicant has mentioned t....
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....helicopters at Customer's specified location(Airport/Heliport etc.) in India as may be designated by the Customer in fully operational condition for the charter hire service. • Further, the applicant is also responsible for ensuring that the aircrafts are available and fully operational for the exclusive use of the customers and the persons authorized by the Customers and the daily flight schedule that is provided by the Customers; • The contract also envisages that the applicant will provide experienced IFR licensed aircrews for the operation and qualified maintenance crews for flying the aircrafts as per the prescribed standards. All necessary clearances, permission to hold helicopter license to operate the helicopter, compliance with all laws, rules, regulations, orders, standards and schedules as specified by the Directorate General of Civil Aviation is to be complied with by the Applicant, who is the service provider; • The Applicant was also obligated to provide to the Customers, the aircraft daily in airworthy condition regularly. For the services rendered, the applicant is eligible for remuneration on a fixed monthly charge basis plus ....
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....customers does not result into any benefit to the applicant as the fuel is consumed for flying the helicopters supplied to the customers; that the arrangement of providing fuel by the applicant was merely for administrative convenience and debit notes raised by the applicant for recovery of fuel do not have any direct nexus with the Charter hire services of Aircrafts provided by the applicant to the customers hence GST should not be applicable on such debit notes. 5. The applicant has further submitted that the accounting policies followed by the applicant for recording the transactions relating to fuel reimbursements from customers have been audited by the statutory auditors of the applicant; that in the audited financials of the applicant, such reimbursements have not been treated as service income and so the same is not recognized/treated as service income in the P & L account of the applicant; that similarly fuel purchases by applicant are not debited to the P&L account as expenses and are treated as receivables from Customers and on recovery of such receivables, the amounts recovered are adjusted against the receivables; that the books of accounts have been prepared and aud....
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....ro qua for rendering such a service." 6. The applicant has submitted that Section 15(2) provides for the list of items to be included for determining the value of 'supply' in terms of the GST legislation and clause(c) reads as under: "incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;" The applicant has stated that as per the provision the following are includible in the value of supply: (i) Incidental expenses charged by the supplier to the recipient of a supply; and (ii) Any amount charged for anything done by the supplier in respect of the supply at the time of, or before supply of services. The applicant has stated that they recover cost of fuel from their customers and the same is not covered under sub-clause (i) as recovery of fuel could not qualify as incidental expenses to the rental services provided by the applicant and the same also does not fall under sub-clause (ii) also as the recovery of fuel cost does not ....
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.... applicant is acting as a pure agent of the customer and therefore reimbursement of fuel debit notes is not to be included in the value of taxable services provided by the applicant. He has also stated that a pure agent is one who while making a supply to the recipient, also receives and incurs expenditure (on some other supply) on behalf of the recipient and claims reimbursement (as actual, without adding it to the value of his own supply) for such supplies from the recipient of the main supply and while the relationship between them(provider of service and recipient of service) in respect of the main service is on a principal to principal basis, the relationship between them in respect of the ancillary supply is that of a pure agent. He has further stated that in terms of Rule 33 of the CGST Rules, 2017, the expenditure or costs incurred by a supplier as a 'pure agent' of the recipient of the supply are excluded from the value of taxable supply for computation of GST and that Rule 33 specifies the conditions that need to be satisfied by a supplier to qualify as a pure agent which are as under: (a) enters into a contractual agreement with the recipient of supply to act as....
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....le 33 of the CGST Rules, 2017, the following conditions also need to be satisfied to qualify as a pure agent: (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation 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; and (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. As regards condition (i) above, the applicant has stated that applicant is acting as pure agent in incurring the fuel cost on behalf of customers and that as per the contract the customers authorized the applicant to incur cost of fuel for aircraft on their behalf in the areas where the customers could not provide fuel and hence this condition is satisfied. As regards condition (ii) above, the applicant has stated that the cost of fuel incurred on behalf of customers was not included in the taxable value indicated in the invoices issued by the applicant on customers,....
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....ransport vehicles with or without operators, other than (i) above. 9 --- The said service is specifically classifiable under Heading No.996603 of Annexure to the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, appears at Sr.No.123 of the said Annexure and reads as under: Sl.No. Chapter,Section or Heading Service Code (Tariff) Service Description 119 Heading 9966 Rental services of transport vehicles with or without operators 120 Group 99660 Rental services of transport vehicles with or without operators. 121 996601 Rental services of road vehicles including buses, coaches, cars, trucks and other motor vehicles, with or without operator. 122 996602 Rental services of water vessels including passenger vessels, freight vessels and the like with or without operator. 123 996603 Rental services of aircraft including passenger aircrafts, freight aircrafts and the like with or without operator. The applicant is holding a Non-scheduled Operators Permit (NSOP) (No.8/1998) issued by the Directorate General of Civil Aviation (hereinafter refer....
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....in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;" The above definition of 'consideration' clearly includes any payment made or to be made, in respect of supply of goods or services or both by the recipient or by any other person. It also includes the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person. In the instant case, the payment made or to be made by the recipient includes payment towards the services rendered by the applicant as well as the payment towards fuel, which has been filled by the applicant in the aircrafts. This means that payment made or to be made by the recipient to the applicant would not only include the payment for the supply of services i.e. "Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator" but would also include the amount for the fuel filled in the aircraft by the applicant. Therefore, the amount of ATF fuel, which i....
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.... on the basis of document issued by the supplier has been reversed by the recipient of the supply. (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. (5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed." 12.2 Therefore, in terms of Section 15(1) of the CGST Act, 2017, 'the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole 'consideration' for the supply. In the instant case, where the applicant and the customer are unrelated parties, the price actually paid or payable for the supply of services includes the value of services i.e. "Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator" as well as the amount....
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....rafts is of the applicant's customers', provision of fuel by the applicant on behalf of the customer for ensuring uninterrupted provision of Charter Hire services cannot be termed as an expense incidental to the main supply and thus cannot be included in the value of services supplied by the applicant for computation of GST. In this context, a reference is required to be made to the relevant portion of Section 15(2) of the CGST Act, 2017, which reads as under: Section 15(2): the value of supply shall include--- (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for any....
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....o refer to Rule 33 of the CGST Rules, 2017 (which reads as under) which reads as under: Rule-33.Value of supply of services in case of pure agent.- Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,- (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation 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; and (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. Explanation.- For the purposes of this rule, the expression "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 bot....
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....the same were charged through separate debit notes raised on Customers by the applicant. As per the condition, the applicant was required to indicate the payment of fuel made by him separately in the invoice issued by him to the recipient of service. However, the applicant has not indicated the payment of fuel made by him on behalf of the recipient of supply, separately on the invoice issued by him to the recipient of service. Hence this condition is not satisfied. (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 the instant case, the supplies procured by the applicant from the third party is that of ATF fuel, which he procures and fills in the aircrafts which are used to provide "Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator'. Therefore, the ATF fuel procured by the applicant for the aircraft is not in addition to the services he supplies on his own account but a part of the above service since only as the ATF fuel filled in the fuel tank of the aircraft would enable the aircraft to....