The Uttarakhand High Court has held that the value of free fuel should not be included in the transaction value of Goods Transport Agency (GTA) service for levy of Goods and Service Tax (GST).
The bench of Chief Justice Ritu Bahri and Justice Rakesh Thapliyal while quasing the AAAR’s ruling observed that where diesel is filled free of cost (FOC) by the service recipient and is not included in the value of GTA service, then the cost of fuel cannot be added to the payment made by the service recipient to the transporter, and further GST be charged from the transporter.
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Background
The petitioner/assessee is a proprietorship firm and providing services of Goods Transport Agency ( in short GTA) to its customers / service recipients.
The assessee sought the advance ruling on the issue whether the value of free diesel filled by service recipient under the accepted terms of contractual agreement in the fleet(s) placed by GTA service provider will subject to the charge of GST by adding this free value diesel in the value of GTA service, under the Central Goods and Services Tax Act, 2017 & Uttarakhand Goods and Service Tax Act, 2017
The AAR held that Goods and Service Tax Advance Ruling Authority Uttarakhand ruled that the value of diesel filled by service recipient in the vehicle(s) provided by the petitioner, on FOC basis as per the terms of the agreement, will be subject to the charge of GST by adding the free value of diesel to arrive at the transaction value of GTA service.
The petitioner challenged the order before the Appellate Authority for Advance Ruling.
The Appellate AAR upheld the earlier order and held that the value of diesel supplied / filled by the service recipient in the vehicle(s) provided by the applicant will form part of the value of GTA service and the same will attract GST in terms of Section 15 of the CGST Act, 2017 and Uttarakhand Goods and Service Tax Act, 2017.
The assessee has challenged the order passed by Appellate Authority for Advance Ruling for the State of Uttarakhand Goods and Service Tax.
Relevant Provisions
Section 7(1)(a) of the Central Goods and Services Tax Act, 2017 states that the supply all forms of supply of goods or services made or agreed to be made for a consideration by a person.
Conclusion – Free Fuel
The court noted that petitioner has entered into an agreement for supply of GTA service for a consideration to the service recipient, and he has to be paid by the recipient only the cost of transportation which does not include the cost of diesel or fuel. The petitioner has to supply GTA service to the service recipient against freight charges, i.e., the only consideration flowing between the parties, agreed under the proposed agreement, is the freight charges. Fuel is not a consideration agreed under the proposed agreement between the petitioner and the service recipient.
The court held that For the free fuel given by the service recipient, petitioner cannot be made liable to pay GST, as the agreement between the parties is only with respect to the freight charges, and the cost of fuel is to be borne by the service recipient.
The court while allowing the petition held that under the agreement between the parties, the said freight charges are the transaction value or the contract price for the GTA service, and this supply of GTA service does not include the cost of fuel as the cost of fuel is borne by the supplier/recipient, and this cost is actually paid by the supplier, and hence this cannot be included in the freight charges.
Case Details
Case Title: New Jai Hind transport Service Versus Union of India and others
Case No.: WRIT PETITION (M/S) NO. 646 OF 2023
Date: 27.09.2024
Counsel For Petitioner: M.P. Devnath and Pulak Raj Mulllik
Counsel For Respondent: Puja Banga
