Case Study Name: AAR – UTTARAKHAND

Case Study Name: AAR – UTTARAKHAND :

DATE OF ORDER – 26-09-2022

Background:

In the case before the Authority for Advance Rulings (AAR) of Uttarakhand, the issue was whether the cost of diesel provided free of cost by the service recipient (customer) should be included in the taxable value of GTA services.

Key Ruling:

1. Inclusion of Diesel Cost:
   • The AAR ruled that the price of diesel, which is filled by the service recipient in the vehicle provided by the service provider (GTA), must be included in the taxable value of the supply of GTA services.
   • Reasoning: The AAR emphasized that diesel is essential for the operation of the vehicle used to transport goods. Without fuel, the vehicle cannot operate, and hence, the transportation service cannot be provided. Therefore, the cost of fuel (diesel) is considered an integral part of the service provided by the GTA.
2. Legal Basis:
   • This decision is based on Section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Uttarakhand Goods and Services Tax Act, 2017, which governs the valuation rules for goods and services. According to these provisions, the value of taxable supply includes all costs incurred by the supplier in connection with the supply of goods or services.

Explanation:

• Integral Part of Service: The AAR reasoned that diesel is crucial for the transportation service because it enables the vehicle to operate and transport goods from one place to another. Therefore, it is not merely incidental but an essential part of the GTA service.
• Valuation Principle: Under GST laws, the value of taxable supply includes all costs, expenses, and incidental charges incurred by the supplier for the supply of goods or services. Since the cost of diesel directly contributes to the provision of the GTA service (transportation of goods), it must be included in the taxable value.

Conclusion:

This ruling clarifies that in the context of GTA services, the cost of diesel provided free of cost by the service recipient must be included when determining the taxable value of the service. It underscores the principle that all inputs essential for providing a service, whether provided free of cost or not, should be considered in the valuation of that service under GST regulations.

This decision ensures consistency in the application of GST rules and provides clarity on the inclusion of such costs, thereby guiding businesses and taxpayers in their compliance with GST requirements related to GTA services.