GST: Sale of LPG, Rental Charges for Supplier Gas System installed at Customer Premises doesn’t constitute Composite Supply, rules AAR [Read Order]

LPG - supplier gas system - AAR - Taxscan

The Telangana Authority of Advance Ruling (AAR) ruled that the Sale of LPG, rental charges for supplier gas systems installed at customer premises don’t constitute a composite supply.

The applicant, M/s. SHV Energy Private Limited is a supplier of LPG to domestic and industrial users. In the application, they have submitted that they enter into an LPG supply agreement with industrial users for a longer period ranging from 5 to 10 years. They set up a structure called a manifold at the premises of the recipient for the supply of LPG. This manifold consists of LPG cylinders, regulators, primary piping, pressure regulator systems, etc., the ownership of the structure lies with the applicant. The purchaser pays rental charges at the rate of Rs.5,000/- per month for this structure.

Since setting up of this system involves substantial investment the customer is obliged to purchase LPG exclusively from the applicant and the conditions of the agreement specify the minimum quantity lifted from SHV. In the event of the purchaser not lifting the minimum quantity, such purchaser has to pay commitment charges at the rate of Rs.2,900/- per metric ton of such shortfall in quantity.

The applicant has sought the advance ruling on the issue of Whether the sale of LPG, Collection of Taking or Pay Charges for not lifting minimum assured quantity and rental charges for supplier gas system installed at the customer premises to store the LPG which is a condition precedent for the supply of LPG be treated as composite supply under section 2(30) of GST Act, 2017.

The Coram of S. V. Kasi Visweshwar Rao and B. Raghu Kiran ruled that sale of LPG, Collection of Taking or Pay Charges for not lifting minimum assured quantity, and rental charges for supplier gas systems installed at the customer premises do not form a composite supply.

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