New Jai Hind Transport Service Through Its Proprietor vs. The Union Of INDIA

Held

The Court held that the value of free diesel supplied by the service recipient to the petitioner cannot be included in the transaction value for the levy of GST on GTA services. The Court reasoned that Section 15(1) of the CGST Act, 2017 defines the value of supply as the transaction value, which is the price actually paid or payable where the price is the sole consideration. The Court noted that the agreement clearly demarcated freight charges as the sole consideration for the GTA service, and the cost of fuel was borne by the service recipient. Relying on Supreme Court judgments such as Union of India & another Vs Intercontinental Consultants and Technocrats Private Limited and Jayhind Projects Ltd. Vs Commissioner of Service Tax, Ahmedabad, the Court reiterated that free supplies by the service recipient are not part of the gross amount charged by the service provider and do not constitute consideration for the service. Therefore, the value of free fuel cannot be added to the value of taxable supply under Section 15(1) and Section 15(2)(b) of the CGST Act, 2017. The impugned order of the Appellate Authority was set aside.

Facts

The petitioner, M/s New Jai Hind Transport Service, a proprietorship firm providing Goods Transport Agency (GTA) services, challenged an order by the Appellate Authority for Advance Ruling, Uttarakhand. The dispute arose from a draft agreement where the service recipient would supply fuel (diesel) free of cost to the petitioner for transporting goods. The petitioner sought an advance ruling on whether the value of this free diesel should be added to the freight charges for GST calculation. The Advance Ruling Authority and the Appellate Authority ruled that the value of free diesel would be subject to GST as part of the GTA service value, citing Section 15 of the CGST Act, 2017.

Key Issues

1. Whether the value of free diesel supplied by the service recipient to the petitioner (GTA service provider) is includible in the transaction value for the levy of GST on GTA services, under Section 15 of the CGST Act, 2017 and the Uttarakhand Goods and Service Tax Act, 2017? Petitioner's arguments: The petitioner contended that the agreement stipulated freight charges as the sole consideration for GTA services. The free fuel was not part of the consideration flowing between the parties, nor was the petitioner supplying fuel. Therefore, its value could not be added to the taxable supply under Section 15(1) and 15(2)(b) of the CGST Act, 2017. They relied on Supreme Court judgments concerning service tax valuation, particularly regarding free supplies. Respondents' arguments: The respondents (Union of India and others) argued, through the Advance Ruling and Appellate Authorities, that the value of free diesel formed part of the GTA service and attracted GST in terms of Section 15 of the CGST Act, 2017. They did not present separate arguments in the High Court judgment.