Value Of Free Fuel Can't Be Added To Value Of Taxable Supply U/S 15 Of CGST Act: Uttarakhand HC

The Uttarakhand High Court held that when as per the agreement, the cost of fuel was to be borne by recipient, then such cost cannot be subjected to charge of GST by adding its value in the transaction value of GTA service.

Pointing that the cost of fuel cannot be added in the account of the transporter, as was governed by the GST rules, the Division Bench comprising Justice Ritu Bahri and Justice Rakesh Thapliyal observed that “value of free fuel cannot be added to value of taxable supply under Section 15(1) and Section 15(2)(b) of the CGST Act, 2017”.

The Bench therefore, reiterated that where diesel is filled free of cost (FOC) by the service recipient and is not included in the value of GTA service, then the cost of fuel cannot be added to the payment made by the service recipient to the transporter.

Facts of the case

The AAR by its order dated Sep 26, 2022, held that value of free diesel filled by service recipient in the vehicle(s) provided by the applicant/ transporter, will be subject to the charge of GST by adding the free value of diesel to arrive at the transaction value of GTA service. When this order was challenged before the AAAR, the appellate authority upheld the same. Hence, the petitioner approached the High Court.

Observations of the High Court

The Bench noted that the Supreme Court in the case of Bhayana Builders has held that the value of goods/materials supplied free of cost by service provider is not to be included in the gross amount for levy of service tax by the service provider.

Thus, as per the consistent view of the law of the land, the cost of fuel cannot be added in the account of the petitioner, who was a transporter, and was governed by the GST Rules, added the Bench.

In the case of the petitioner, the Bench found that as per the agreement, the cost of fuel was to be borne by the service recipient and the cost of this fuel cannot be subjected to charge of GST by adding the value of free diesel in the transaction value of GTA Service done by petitioner.

Hence, the High Court concluded that value of free fuel cannot be added to value of taxable supply u/s 15(1) and s.15(2)(b) of the CGST Act, 2017.

Therefore, the High Court allowed the Assessee's petition and set aside the order of the AAAR.

Counsel for Appellant/ Assessee: Advocates M P Devnath and Pulak Raj Mulllik

Counsel for Respondent/ Revenue: Advocates Puja Banga and Shobhit Saharia

Case Title: New Jai Hind Transport Service vs Union of India

Case Number: Writ Petition (M/s) No. 646 of 2023

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