Home > Recent Judgements > The Value Of Free Fuel Can’t Be Added To Value Of Taxable Supply
Jan 03, 2025
BACKGROUND
In the case between New Jai Hind Transport Service vs Union of India, the Uttarakhand High Court stressed in a landmark decision that, in accordance with Section 15 of the Central Goods and Services Tax (“CGST”) Act, 2017, the value of free gasoline supplied by a service provider cannot be included in the taxable supply. This ruling resulted from a petition in which the Assesses contested the Appellate Authority for Advance Ruling’s (“AAAR”) determination pertaining to the assessment of rendered services.
SECTION 15 OF THE CENTRE GOODS AND SERVICE TAX ACT,2017
As per section 15(1) of the CGST Act, where the supplier and the recipient of the supply are not related and price is the sole consideration for the supply, the value of supply of goods or services or both shall be the transaction value. Section 15(4) provides that where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.
KEY ISSUES
- Under section 15 of the CGST Act of 2017, is it possible to include the value of free gasoline that is given in conjunction with goods or services in the value of the taxable supply?
- Does “consideration” include free fuel?
- Is value in taxable supply really excluded by the phrase “free”?
- What is the purpose of section 15’s “price paid or payable” clause?
- Is a consideration-linked supply different from a promotional freebie?
JUDGEMENT OF THE CASE
The ruling of the Uttarakhand High Court emphasizes how crucial it is to follow the law and taxation rules. By keeping the value of free gasoline out of the taxable supply, the Court has maintained the core principles of GST, which are justice, transparency, and simplicity. Businesses are relieved by this ruling, which also serves as a reminder that the tax system must adhere to the law.
OBSERVATION
The CGST Act’s definition of “consideration” and the requirements of Section 15 were examined by the Uttarakhand High Court. The Court noted:
According to the CGST Act, consideration is defined as any payment made or scheduled to be given, in cash or in another form, to encourage the supply of goods or services. The Court did stress, nevertheless, that consideration must include a contractual duty to pay.
According to the Court, the price that is actually paid or due for the supply is the transaction value. The gasoline cannot be included in the transaction value since it was provided at no cost and there was no financial or non-financial movement from the service provider to the recipient.
For more information or queries, please email us at
[email protected]
