HC holds delay in filing of appeal can be condoned beyond the limitation period prescribed under GST

This Tax Alert summarizes a recent judgement of the Division Bench of Chhattisgarh High Court (HC). The issue involved was whether the fuel provided by the service recipient on free of cost (FOC) basis is to be added in value of supply of services provided by goods transport agency (GTA).

Assessee is engaged in transportation of goods, wherein fuel is provided by the recipient as per contractual arrangement. It sought advance ruling to determine value of supply of GTA services provided to such recipient.

The Authority for Advance Ruling (AAR) ruled that FOC fuel will be included in the value of GTA services. Aggrieved, assessee filed an appeal before Appellate Authority for Advance Ruling (AAAR).

Since there was difference of opinion between the members (State and Centre) of AAAR, no advance ruling was rendered. Assessee, being remediless, filed writ petition before the HC.

HC observed that fuel is an integral part used in providing transportation service and is essential for GTA service provider. Without fuel, the entire business of GTA cannot survive. 

Further, the expenses to fill the diesel in vehicle in furtherance of supply of service in normal condition is to be incurred by GTA and it is his liability to fulfill such supply. The provision of Section 15(2)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act) takes within its sweep the value of expenses which is incurred by recipient. Therefore, even by agreement between the GTA and service recipient, this statutory liability cannot be sidelined. 

Thus, HC held that fuel provided free of cost by the service recipient would be included in value of supply of GTA services.

Comments

The ruling is likely to have an adverse impact on the businesses wherein provision of free of cost supplies by the service recipient is a prevalent practice. 

The taxpayers may have to evaluate the implication of the ruling since it could result in additional tax burden where the recipient is not eligible to claim the input tax credit.