18% GST Rate on Diesel Under Composite Service As Per KGST Act

For M/s. goodwill auto’s [Advance Ruling No. KAR ADRG 44/2021 concluded on July 30, 2021], M/s. Goodwill Auto’s (Applicant) seeks the advance ruling the GST subject to that upon the cost of the diesel incurred in the form of the reimbursements for running the diesel generator (DG) which is mentioned for the furnishing of the DG rental service.

The question rise when the client for the applicant did not furnish GST that diesel is a non-GST object and thus it does not subject to tax beneath section 9 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Karnataka GST Act, 2017 (KGST Act).

The Hon’ble Karnataka Authority for Advance Ruling (AAR) Get to know about AAR (Authority for Advance Rulings) under GST India along with its mechanism. Also, we have described its objectives, powers, orders, etc specified that the contract between the applicant and the recipient is for carrying the DG set and is a complete contract through the consideration of the fixed component and a variable element. The fixed component is the monthly fixed rent which is used to charge the invoice for the DG set and the variable charge is the charge for the diesel utilized. Both are part of the similar acknowledgement and are for the contract to furnish DG set on hire.

However, it seems that the petitioner is obtaining the reimbursement of diesel costs. The applicant shall obtain the reimbursement on the diesel cost as seen from the scenario. For the DG set service which is an integral part of the supply of DG Set rental service. There are no other means for the supply of diesel and the invoice proceeded for the reimbursement of diesel cost is nothing but an additional invoice appeared for the supply of rental service of DG set.

Thus the reimbursement charges for running the DG set is another concern for the supply of the DG set upon the rent according to section 15 of the CGST/KGST Act.

Hence it is liable for 18% GST that implies for the case in which the diesel is engaged in the composite services and charges are liable the fuel is applicable for GST as per the invoice value.