HSD Oil issued Free of Cost by Service Recipient to applicant would form part of Value of Supply of Service by Applicant: AAR [Read Order]

The Andhra Pradesh Authority of Advance Ruling (AAR) ruled that HSD Oil issued free of cost by the service recipient to the applicant would form part of the value of supply of service by the applicant under Section 15(2)(b) of CGST Act, 2017.

The applicant, M/s Pulluri Mining & Logistics private Limited is a service provider rendering the support services relating to mining. The applicant has received work through an order from M/s Shree Jayajyothi Cement Pvt. Ltd. for executing mining contract at Srinagar in the nature of raising of Limestone (excavation) at Yanakandla Limestone Mines, and other such mines in Andhra Pradesh and to deliver Limestone to Yanakandla Limestone Hopper belonging to Sree Jayajothi Cements Private Limited.

The works are to be carried out by using the listed equipment and vehicles. The listed heavy equipment & vehicles will be deployed for exclusive usage of this contract and shall not move out of the service recipient premises unless it is essential for the performance of the contract.

HSD oil required for operating the above heavy equipment and vehicles will be under the scope of the service recipient and HSD oil is issued free of cost from the service recipient’s storage tank.

The applicant has sought advance ruling on the issue whether the HSD Oil issued free of cost by the service recipient to the applicant would form part of the value of supply of service to the applicant as per Section 15 of the CGST Act, 2017, and more particularly under sub-section (2) (b) of Section 15 of the CGST Act.

The Authority consisting of members D. Ramesh and M. Shreekanth ruled that  HSD Oil issued free of cost by the service recipient to the applicant would form part of the value of supply of service by the applicant under Section 15(2)(b) of CGST Act, 2017.

“Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both is includible in value,” the AAR, while clarifying the legal position said.