GST on diesel cost incurred for running DG set in the course of providing DG Rental Services
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Name of the Applicant |
Goodwill Auto’s |
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Appeal No.: |
Advance Ruling No. KAR ADRG 44/2021 |
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Ruling pronounced by: |
GST AAR Karnataka |
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Date of Ruling |
30-07-2021 |
Brief Facts:
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The applicant is a partnership firm engaged in the business of leasing of DG set to customers like LIC of India, Syndicate Bank etc. The applicant has entered into agreement with LI, Udupi to install DG set on hire basis for fixed rent along with reimbursement of diesel cost at Rs. 305 per hour on usage of DG set. |
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The recipient of services i.e. LIC of India was of the opinion that the taxed collected by the applicant pertaining to the reimbursement of diesel charges for running DG set was wrong as the said commodity diesel does not come under the purview of GST. Therefore, the said concern has asked the applicant to reimburse the wrongly collected taxes. |
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In view of above, the applicant sought advance ruling on the question: Is GST applicable on diesel cost incurred for running DG set in the course of providing DG rental services? |
Observations of Authority:
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The contract entered between the applicant and the recipient is for the hiring of DG set and is a comprehensive contract with the consideration having a fixed component and a variable component. The fixed component is the monthly fixed rent charged in the invoice for the DG set and the variable charge is the charge for the diesel used. Both are the part of the same consideration and is for the contract of supplying DG set on hire. |
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Though it appears that the applicant is receiving the reimbursement of diesel cost, the recipient is not paying for the diesel but for the services of DG set, which is an integral part of the supply of DG Set rental service. There is no separate contract for supply of diesel and the invoice issued for the reimbursement of diesel cost is nothing but a supplementary invoice issued for the supply of rental service of DG set. |
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Hence, consideration for reimbursement of expenses as cost of the diesel for running of the DG Set is nothing but the additional consideration for the renting of DG Set and attracts CGST @ 9% and SGST @9%. |
Ruling:
The cost of the diesel incurred for running DG Set in the course of providing DG Rental Service is nothing but additional consideration for the supply of DG Set on rent as per section 15 of the CGST/KGST Act and hence attracts CGST @ 9% and KGST @ 9%.
