TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 1287
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....he companies/parties (service recipient) and as per terms of contracts, High Speed Diesel (fuel) filled and consumed in the engaged dedicated (chartered) vehicles used for transportation under GTA service will be under the scope of the service recipient and freight is paid by the companies / parties, excluding diesel. The applicant thus seeks advance ruling on the above said points, considering that the diesel filled and consumed by the recipient company would not be included in the amount charged by the applicant in tax invoice issued under Section 31 of CGST Act, 2017. 3. Contentions of the applicant:- The applicant, is a GTA service engaged in providing services of transportation of goods by road and the applicant intends to enter into a contract with the service recipient for providing GTA services. As per the draft agreement, the applicant is required to provide trucks / trailers on a day to day requirement on a non-exclusive basis and as per the scope of service of the applicant is to provide the truck /trailer along with the driver and report at the unit of the service recipient. The fuel is in the scope of the service recipient and not in the scope of work of the applicant....
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....s been incurred by the recipient and not included in the price actually paid or payable. As the contractual liability of the fuel is not that of the applicant, cost of fuel cannot be included in the scope of supply made by the applicant. Further that it stands settled in service tax laws that value of diesel supplied free of cost by the client in the course of providing service, the said value cannot become part of GTA service. That, the matter is covered by circular no. 47/27/2018-GST dated 8.6.2018, wherein it has been clarified in case of tools, moulds and dies which are in the scope of buyer and are provided on FOC basis to the supplier for use in the manufacturing goods, then same will not form part of the transaction value and no GST will be payable thereon. VII. That, even otherwise the transaction is revenue neutral as service recipient is eligible to fake input tax credit of the GST charged by the applicant on the GTA service provided. However, in terms of section 15 (2) (b), it will be erroneous and contrary to law for the applicant to charge GST just because recipient is entitled to ITC. VIII. That, onus even if put on the applicant to include the cost of diesel woul....
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....he issues involved in the ruling so sought by the applicant and the law as applicable in the present case. 5.1 As per Section 7 (1) of CGST Act: For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. 5.2 Section 2(31) of the CGST ACT, 2017 defines consideration as: Consideration in relation to the supply of goods or services includes (a) Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) The moneta....
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....he supply has been effected, if- (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount 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.8 Explanation.-For the purposes of this Act,- (a) persons shall be deemed to be "related persons" if- (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognized partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shar....
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....lude any subsidy given by the Central Government or a State Government: 5.5 In terms of the provisions of law as envisaged under Section 15 (1) of CGST Act, 2017, to ascertain as to whether the value of a supply of services is the transaction value, which is the price actually paid or payable for the said supply of services and as to determine whether the value of taxable supply paid by recipient to the supplier is the 'sole consideration", it is necessary to refer to the definition of the term 'consideration". The term 'consideration' has been defined under Section 2(31) of the CGST Act supra, to mean and include monetary value of any act or forbearance, whether or not voluntary which is made in respect of, in response to or for the inducement of the said supply of goods and/or services. Such consideration can flow from the recipient of supply or any other person and it could be either monetary or non-monetary consideration. Thus Section 15 (1) read with Section 2 (31) of CGST Act, 2017, stipulates that any monetary value in relation to the said supply for materializing such supply of services is definitely a "consideration'' for such supply. The applican....
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.... liability. It will definitely not be out of context to mention here that in the intended transaction, the value of diesel will be charged as "expense" by the service receiver and will not go unaccounted in the books of accounts of the service receiver. Further the said provision of diesel to the applicant by the service receiver would definitely be treatable as an independent "supply" exigible to tax as applicable, had diesel not been out of the scope of levy under GST as of now. Thus, this also appears to be a cause to avoid incidence of tax on the value of the all important ingredient i.e. diesel (fuel), much necessary for the provision of the said service by the applicant GTA. This expenditure on account of Diesel charges in this case by the service receiver, is indispensable and inevitably incurred to provide taxable service and hence, essentially forms part of value of taxable service. Further if the proposed concept of provision of "free of cost diesel" by the service receiver for the instant supply of service of transportation of goods by road that too unaccounted by the service provider CIA, is justifiable it becomes all the more inconceivable to visualize a situation when....
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....on that the value of diesel supplied free of cost by the client in the course of providing service cannot become part of GTA service, the applicant have cited reference to the case law of M/s Karamjeet Singh and Co. Ltd vs CCE 2017 (9) TMI 1125 CESTAT, M/s RK Transport Company vz CCE 2020(11)TMI CESTAT, New Delhi, UOI vs Intercontinental Consultants and Technocrafts Pvt Ltd 2018 (3) TMI 357 and Commissioner of Service tax vs M/s Bhayana Builders (P) Ltd 2018 (2) TMI 1325 SC. These case laws pertain to the erstwhile service tax period and that too prior to the negative list regime under Service tax provisions, governed by Finance Act, 1994. The case of Karmajeet singh pertains to the period 2008 to 2012, whereas the case of M/s RK Transport Company pertains to 2008 to 2010 and that of M/s Intercontinental Consultants pertains to the period 2002 to 2007. In the case of Karamjeet Singh the decision was based on pronouncement of Hon'ble Delhi High Court in intercontinental Consultants & Technocrafts Pvt. Ltd. v. Union of India holding therein that that Rule 5(1) of the Service Tax Rules runs counter and is repugnant to Sections 66 and 67 of the Finance Act, 1994 and to that extent....
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.... shall be added to the value of the components and that in such cases the OEM will be required to reverse the credit availed on such moulds / dies, as the same will not be considered to be provided by OEM to the component manufacturer in the course or furtherance of the former's business. In the case of supply of components, which is supply of goods and not service, unlike in this case it is to be noted that components manufactured for the Original Equipment manufacturer (OEM), are a teller made item and it is manufactured using moulds/die by the component manufacturer as per the specifications and design as required by the OEM, for its further use in the subsequent manufacture of Original equipment i.e. for the furtherance of business, whereas in the case of provisions of transportation service fuel is used by the GTA in his vehicle for provision of said transportation service. Further unlike fuel which gets consumed instantly during the very provision of the said transportation service, there is no such case of moulds/ dies getting consumed instantaneously. Here also it is to be noted that the said cited circular at para 1.3 in very unambiguous terms provide for reversal of I....
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....r than by the appellant to the franchisees. Hence, definitely qualify for for such service provided". From the above discussion, we are of the firm opinion that the amount of weekly gross sales @4.5% but for franchise advertisement fund is nothing but the part of the gross value of the contract for providing the franchise Service and, hence was equally taxable as 8.5% of the said weekly gross sales is taxable. Further in the aforesaid case, Hon'ble Tribunal distinguished the findings in Intercontinental consultants and technocrats Pvt Ltd supra, holding that "Similarly, Intercontinental Consultants and Technocrats Pvt Ltd case supra is also not applicable in view of the above discussion about Section 67 of the Act in accordance whereof the valuation of taxable service is nothing more or nothing less than the consideration paid as quid pro quo for the service. As already discussed above even 4.5% of weekly gross value, irrespective of given as franchise advertisement fund, is the value as a quid pro quo service. This decision of CESTAT was also upheld by Hon'ble Supreme Court [2020 (32) GSTL J82(S.C)] The ratio of above judicial pronouncement is squarely applicable to the ....