GST is levied solely on supervision fees when the recipient covers the expenses for materials and installation.

Introduction

Case involves the Uttar Pradesh Power Transmission Corporation Limited (UPPTCL), which sought clarity on the inclusion of material and execution costs in the taxable value for determining GST liability when only supervision charges are levied.

The Case

UPPTCL is responsible for the transmission of electrical energy in Uttar Pradesh. It also undertakes 'deposit works' at the behest of consumers, which involves adding to or modifying the existing distribution system. The applicant sought an AR on whether the value of materials and execution costs for these works should be included in the taxable value when the applicant charges only supervision fees.

Key Points of the Ruling

• Supervision Charges as Taxable Supply: The supervision services provided by UPPTCL constitute a taxable supply under the GST Act.
• Exclusion of Material and Execution Costs: The value of materials and execution costs borne by the recipient of the service is not included in the taxable value for GST.
• Reasoning: UPPTCL is not a supplier of goods or services under the GST Act in this scenario. The contract for execution is between the consumer and a third-party contractor, with UPPTCL acting solely as a supervisor.
• No Consideration under GST: The transaction lacks the necessary elements of a supplier-recipient relationship and consideration as defined under the GST Act.
• Classification of Services: The supervision services provided by UPPTCL are classified under SAC 999799 (Other services n.e.c.) and are liable to GST.

Implications

This ruling provides clarity on the GST treatment of supervision charges in a specific context. It emphasizes that only the value of services provided, and not the overall project cost, is subject to GST when the service provider's role is limited to supervision.Businesses providing similar services should carefully analyze their contractual arrangements and the nature of their involvement to determine the correct GST implications.

GST Case Law Uttar Pradesh Power Transmission Corporation Limited

Citation-2024 TAXONATION 1668 (UTTAR PRADESH-AAR)

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