The Gujarat Authority of Advance Ruling (AAR) in its recent ruling in the case of M/s. Global Vectra Helicorp ltd. (GVHL), while rejecting the ‘pure agency plea’ ruled that ‘fuel reimbursement’ amount received by Aircraft Rental service-providers forms part of value of services provided.
Facts of the case:
The applicant M/s. Global Vectra Helicorp ltd. (GVHL) holds a Non-scheduled Operator’s Permit (NSOP) issued by the Directorate General of Civil Aviation (DGCA).
It employs a fleet of around 30 helicopters (aircrafts) for providing services classifiable under HSN 996603 i.e. Rental services of aircraft including passenger aircrafts, freight aircrafts, and the like with or without operator) in terms of Notification No.11/2017-Central Tax (Rate) dated June 28, 2017 (Charter Hire Services).
Under the charter hire services entered into by the applicant with various customers, the applicant is responsible for operating and maintaining the aircraft.
The applicant employs experienced and qualified pilots and qualified engineering crew in accordance with aviation standards and ensures that the Aircraft are available and fully operational during the term of the contract.
Aviation Turbine Fuel (ATF) is required for flying the Aircrafts. While in terms of the contracts, the applicant agreed to provide rental services of aircraft in respect of the ATF, it was agreed that provision of the same for the purpose of flying of the aircraft would be the responsibility of the Customers.
However, at locations where the customer is unable to provide the fuel, in order to ensure continuity of flying, the contract requires GVHL to procure the fuel on behalf of the Customer, and subsequently, the cost of the fuel is reimbursed by the Customer at actual (without charging any mark-up).
The applicant contends that GVHL undertakes the activity of procurement of fuel as a ‘pure agent’ as per Rule 33 of the CGST Act, 2017 and accordingly the reimbursement of cost of fuel should not be included in value of supply.
Issue on which ruling was sought:
Whether in terms of the valuation provisions under GST legislation, the amount recovered as reimbursement (at actual) by the applicant from the customer, for the fuel procured on behalf of the Customer is required to be included in the value of services provided by the Applicant.
Gujarat AAR: Ruling
The AAR noted that Applicant is involved in the provision of services “Rental services of aircraft including passenger aircraft, freight aircraft and the like with or without operator”.
The two-member bench of Sanjay Saxena and Mohit Agarwal ruled that the conditions for being a pure agent as mandated in Rule 33 of CGST Rules, 2017 are not satisfied as relevant documents for proving it was not produced by the appellant. Accordingly it was adjudged that the amount recovered as reimbursement by applicant M/s. Global Vectra Helicorp Ltd. from the customer, for fuel procured on behalf of the Customer under a Charter Hire arrangement, is required to be included in the value of services provided.
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