Inclusion of Reimbursement for GST Valuation – AAR Gujarat
by ReinHeads Team | Oct 9, 2020
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AAR Gujarat*- Inclusion of Reimbursement for GST Valuation
| Facts |
- M/s Global Vectra Helicorp Limited (‘the Applicant’) is engaged in providing aircraft rental services with or without operator, classifiable under HSN 996603
- Under the Charter Hire Service Contract (‘the Contract’) entered with the customer, the Applicant is
- Responsible for operating, maintaining the aircrafts, employ experienced and qualified pilots/ engineering crew in accordance with aviation standards
- Ensure that Aircrafts are available and fully operational during the term of Contract with the customer
- As per the Contract, Aviation Turbine Fuel (‘ATF’) for the Aircraft would be the responsibility of the customer. However, at locations where the customer is unable to provide the fuel, in order to ensure continuity of flying, the Applicant is required to procure the same on behalf of the customer, which would be reimbursed at cost by the customer (without any mark-up) through a separate debit note
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| Issue before the Authority for Advance Ruling, Gujarat (‘the AAR’) |
- Whether in terms of the valuation provisions under the GST legislation, amount recovered as reimbursement (at actual) by the Applicant from the customer (for the fuel procured on behalf of the customer) is required to be included in the value of services provided by the Applicant?
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| Discussion and Findings of the AAR |
| The AAR held that the supply of ATF (at actuals) would be classified as a ‘taxable supply’ and included in the ‘value of services’ provided by the Applicant under the CGST Act, 2017 on account of the following:
| Aspects |
Findings of the AAR |
| Definition of Consideration |
· Definition of ‘consideration’ clearly includes any payment made/ to be made by the recipient (in respect of supplies) and also includes monetary value of any act or forbearance or for the inducement of the supplies
· In the instant case, the payment made or to be made by the customer to the Applicant not only include the payment for the supply of services but would also include the fuel amount filled by the Applicant |
| Value of Taxable Supply |
- As per the Section 15 of the CGST Act:
- Value of supply shall be the transaction value, which is the price actually paid/ payable for supply of goods/ services or both where the supplier and the recipient are not related and price is the sole ‘consideration’ for the supply
- Any amount charged for anything done by the supplier in respect of supply of goods/ services at the time of, or before delivery of goods/ supply of services also form part of the value
- In the instant case, supply of services includes the value of services as well as the amount of fuel filled in by the Applicant, which would be the sole consideration for the supply
- The Applicant is filling ATF fuel before the supply of services to the customer. The act of the Applicant would be considered as ‘any amount charged for anything done by the supplier in respect of the supply of goods/ services at the time of or before supply of services’ and therefore form part of the value
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| Definition of Pure Agent |
The Applicant does not satisfy the conditions of the ‘Pure Agent’ on account of the following reasons:
- No documentary evidence is produced to prove that the reimbursement received is as per actuals and without any mark
- The Applicant has not indicated that the payment of fuel is made by him (on behalf of the customer) separately on the invoice issued by him to the customer
- The ATF fuel procured by the Applicant is not in addition to the services he supply on his own account but a part of the main service since once the fuel is filled, it would enable the Aircraft to fly and thereby the Applicant can provide the service. Thus, the fuel so procured by the Applicant is used for his own interest.
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*Advance Ruling No. GUJ/GAAR/R/21/2020 dated 02.07.2020 (The Authority for Advance Ruling, Gujarat) |
