The value of free diesel cannot be included in the transaction value of the GTA service for GST purposes.

Introduction

M/s New Jai Hind Transport Service, a proprietorship offering Goods Transport Agency (GTA) services, contested an appellate ruling requiring GST on free diesel provided by its service recipient. The Uttarakhand GST authority initially upheld this requirement, deeming free fuel a taxable component under the Central Goods and Services Tax Act, 2017. However, citing Supreme Court judgments that exclude free-of-cost supplies from taxable service values, the petitioner argued that only freight charges (excluding fuel costs) should constitute the taxable value. The court ruled in favor of the petitioner, setting aside the GST requirement on the free fuel, as it does not form part of the taxable supply value under the CGST Act.

Case Overview

The petitioner, a sole proprietor operating a GTA business, entered into an agreement with a service recipient to transport goods from the recipient's factory to a specified destination. The agreement stipulated that the service recipient would supply fuel free of cost to the GTA for the transportation.

The GTA sought an advance ruling from the Uttarakhand GST Authority on whether the value of free diesel should be included in the transaction value of the GTA service for GST purposes. Both the authority and the appellate authority ruled that the value of free diesel should be included, leading the GTA to file a writ petition challenging this decision.

Legal Analysis

The crux of the dispute lies in the interpretation of Section 15 of the Central Goods and Services Tax Act, 2017, which deals with the valuation of taxable supply. The petitioner argued that the free fuel supplied by the service recipient should not be included in the transaction value as it was not a consideration for the GTA service.

The respondents, on the other hand, contended that the free fuel was an integral part of the GTA service and should be included in the value of supply. They argued that without fuel, the GTA could not effectively provide its services.

Key Arguments and Case Law

Petitioner's Arguments:

• The free fuel was not a consideration for the GTA service.
• The agreement specifically excluded the cost of fuel from the freight charges.
• The petitioner was only liable to pay GST on the freight charges.

Respondent's Arguments:

• The free fuel was an integral part of the GTA service.
• Without fuel, the GTA could not effectively provide its services.
• Section 15(2)(b) of the CGST Act mandates the inclusion of any amount incurred by the recipient but not included in the price paid for the goods or services.

Conclusion

To support their arguments, both parties cited various case laws and circulars. The petitioner relied on Supreme Court judgments that held that free supplies provided by the service recipient should not be included in the value of the service.

GST Case Law New Jai Hind Transport Service Versus Union of India

Citation-2024 TAXONATION 2600 (UTTARAKHAND)

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