‘Fuel Reimbursement’ received by Aircraft Rental service-provider forms part of ‘value’: AAR [Read Order]

The Gujarat Authority of Advance Ruling (AAR) while rejecting the ‘pure agency plea’ ruled that ‘fuel reimbursement’ received by Aircraft Rental service-providers forms part of ‘value’.

The applicant M/s. Global Vectra Helicorp ltd. hold a Non-scheduled Operator’s Permit (NSOP) issued by the Directorate General of Civil Aviation (DGCA).

It employs a fleet of around 30 helicopters (aircrafts) for providing services classifiable under HSN 996603 i.e. Rental services of aircraft including passenger aircrafts, freight aircrafts, and the like with or without operator) in terms of  Notification No.11/2017-Central Tax (Rate) dated June 28, 2017 (Charter Hire Services).

Under the charter hire services entered into by the applicant with various customers, the applicant is responsible for operating and maintaining the aircraft. The applicant employs experienced and qualified pilots and qualified engineering crew in accordance with aviation standards and ensures that the Aircraft are available and fully operational during the term of the contract. Aviation Turbine Fuel (ATF) is required for flying the Aircrafts.

While in terms of the contracts, the applicant agreed to provide rental services of aircraft in respect of the ATF, it was agreed that provision of the same for the purpose of flying of the aircraft would be the responsibility of the Customers.

However, at locations where the customer is unable to provide the fuel, in order to ensure continuity of flying, the contract requires GVHL to procure the fuel on behalf of the Customer, and subsequently, the cost of the fuel is reimbursed by the Customer at actual (without charging any mark-up). GVHL undertakes the activity of procurement of fuel as a ‘pure agent’.

The applicant sought advance ruling on the issue of whether in terms of the valuation provisions under GST legislation, the 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.

The AAR noted that Applicant is involved in the provision of services “Rental services of aircraft including passenger aircraft, freight aircraft and the like with or without operator”.

The two-member bench of Sanjay Saxena and Mohit Agarwal ruled that the amount recovered as reimbursement by applicant M/s. Global Vectra Helicorp Ltd. from the customer, for fuel procured on behalf of the Customer under a Charter Hire arrangement, is required to be included in the value of services provided.