Valuation of Supply and goods/services provided by Recipient to the Supplier Free of Cost – Drafting is very important.

Valuation of Supply and goods/services provided by Recipient to the Supplier Free of Cost - Drafting is very important.

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Valuation of Supply and goods/services provided by Recipient to the Supplier Free of Cost – Drafting is very important.
It is imperative how the agreement is drafted about who does what.
Shri Navodit Agarwal [2019] 104 taxmann.com 420 (AAR – CHHATTISGARH)
Issue involved was Whether supply of diesel by recipient is to be added to the freight amount charged by the applicant or not.
It is held that Applicant is required to charge GST upon M/s Shree Raipur Cement, C.G on the total amount including the cost of diesel i.e. on the total freight amount inclusive of the cost of diesel so provided by the service recipient i.e. M/s Shree Raipur Cement.
Question emerges as to whether the Judgement throws something new.
Not really.
 It is the same thing that if any exclusion has to be made from valuation of a supply, it should be clear and express and there is a very thin line between the inclusion and the exclusion. Its all in the writing as they say.
There are two very important aspects to be observed in the judgement:
a) Pursuant to the oral agreement between the aforesaid parties, recipient proposed that while transporting their cement/ clinkers, diesel required would be provided by Shree Raipur Cement.
b) Section 15(2)(b) does not covers free inputs or services supplied by recipient, as only ‘amount’ paid by recipient on behalf of supplier is includible. This would be so only where there was contractual liability on supplier to make those supplies.
Subsequent to the agreement between supplier and recipient, supplier has the option to procure goods from any third party and out of the options available, if the supplier and agrees and recipient provides such goods, then valuation of supply has to be adjusted accordingly and such value of goods has to be included in value of supply.

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