The Uttarakhand Authority of Advance Ruling (AAR) in the case of Uttarakhand Civil Aviation Development Authority vide Order dated 27.03.2023, has held that GST is payable on monthly rental, night charges, and fuel on a mileage basis when availing motor vehicle rental services.

In the present case, the applicant received motor vehicle rental services, including fuel charges, from service providers. While submitting the claim bill for a particular month, both service providers are using two different methodologies to calculate the leviable tax. One of the service provider was charging 5% GST on the whole amount of the bill, including monthly rental, night charges, and fuel on a mileage basis. Whereas, the another service provider was charging 5% GST only on the monthly rent component of the bill, and no GST is charged on fuel charges.

The applicant sought an advance ruling on the issue of whether the service provider can charge GST on the whole amount of the bill (monthly rental + night charges + fuel on a mileage basis) or only on the monthly rental (excluding night charges + fuel on a mileage basis).

Section 15 of the CGST Act, 2017 mandates that the value of supply shall include any other amount that the supplier is liable to pay in relation to supply but which has been incurred by the recipient of the supply and is not included in the price actually paid or payable for the goods or services, or both. 

The AAR noted that the contract entered into between the applicant and the provider of services is for motor vehicle hire services, in which the liability to arrange fuel and the maintenance of the vehicle so deployed lies with the service provider and is a comprehensive contract with a consideration that varies depending upon the kilometer traveled. Hence, the reimbursement of expenses for providing said services under any heading is nothing but an additional consideration for the provision of said services and attracts GST on the total value.

The AAR has observed that without fuel, the motor vehicle does not operate (run), and without running, i.e., moving from one place to another, the act of motor vehicle hire services does not happen. Motor vehicle hire services have the integral component of running or operating the vehicle from one place to another for transportation. To claim to provide the said services, actual transportation has to take place, and without fuel, this cannot happen.

The AAR held that service providers have to charge GST on the whole amount of the bill, i.e., monthly rental, night charges, and fuel on a mileage basis.