New Jai Hind Transport Service

versus

Union of India vide WRIT PETITION (M/S) NO. 646 OF 2023 dated 27.09.2024

Citation: 2024 Taxo.online 2305

The Uttarakhand High Court in this case address the interpretation of “value of supply” under the GST framework and the importance of contractual obligations in determining tax liabilities. The Court emphasized on the principle that only amounts directly related to the consideration for the provision of taxable services should be included in the valuation for tax purposes. It provides clarity on the treatment of free supplies in the context of service tax and GST, ensuring that service providers are not unduly burdened by costs that do not constitute their revenue for taxable services. 

The court, relying on the consistent view of the Supreme Court in the cases such as Commissioner of Service Tax v. Bhayana Builders Pvt. Ltd., (2018) 3 SCC 782, Union of India v. Intercontinental Consultants & Technocrats Pvt. Ltd., (2018) 4 SCC 669, Jayhind Projects Ltd. v. Commissioner of Service Tax, (2024), has held that the cost of free diesel provided by the recipient cannot be added to the value of the GTA service for the purpose of determining GST liability. The cost of fuel, if borne by the recipient, is not part of the consideration charged for the service and thus should not be included in the taxable value under Section 15(1) and 15(2)(b) of the CGST Act, 2017. 

As a result, the court allowed the writ petition, setting aside the impugned order and ruling that the value of free fuel cannot be included in the valuation of the GTA service for the purpose of GST. 

In this case, the Writ Petition filed challenge order from the Appellate Authority for Advance Ruling, which upheld a prior ruling stating that the value of free diesel provided by the service recipient should be included in the taxable value of the GTA service. It was argued that only consideration agreed upon is the freight charges; the fuel is not part of this consideration as per the agreement. However, the respondent contended that free fuel is essential for the GTA service and thus should be included in the value of the service u/s15(2)(b). Omission in the contract regarding the fuel cost cannot exclude it from the taxable value, as it is deemed necessary for the service to be rendered.  

 

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