The Applicant inter-alia engaged in the business of leasing of Diesel Generator (‘DG’) set. The Applicant entered into an agreement with one of the recipient of service to install DG set on rental along with reimbursement of the cost on diesel incurred on usage of DG. However, the recipient alleged that tax collected by the Applicant pertaining to the reimbursement of diesel charges for usage of DG set was erroneous being diesel a non GST goods as per section 9 of the CGST Act. In connection thereto, the Applicant sought an Advance Ruling before Karnataka AAR on applicability of GST on cost of the diesel incurred in the form of reimbursements for running DG set in the course of providing DG Rental Service.
In regards to above, referring to sec 2(31) of the CGST Act, the AAR observed that the reimbursement of the diesel cost incurred for running DG set are incidental expenses and are part of the consideration. Since, there is no separate contract for supply of diesel, both the services form part of the same contract i.e. supplying DG Set on hire. Accordingly, it was held by AAR that reimbursement charges for running DG Set being an additional consideration for the supply of DG Set on rent as per sec 15 of the CGST Act, it will attract GST @ 18%.
Goodwill Auto’s [Advance Ruling No. KARADRG 44/2021]
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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