Fuel Charges invoiced separately on per kilometer basis Do Not Attract GST: AAR

The assessee, Vision Plus Security Control Limited, is about to engage in the managing fleet operation for an organization for the repair and maintenance of vehicles, insurance, drivers, and fuel charges. During this, the applicant will raise bills separately for all the services and charge taxes as applicable. The applicant will charge customers regarding the due expenses on a kilometer basis.

The assessee filed an application before the Authority for Advance Ruling (AAR), Chattisgarh, seeking an advance ruling for the following questions:

“1. whether the invoice for diesel and petrol charges, invoiced separately on a per kilometer basis, would be considered a supply of goods and liable to VAT, or liable to GST?

2. Whether the fuel component, when not bundled with the service and invoiced distinctly, is to be treated independently for tax purposes?

3. What is the appropriate classification and rate of tax, if GST is applicable?

4. If GST is applicable on fuel charges then further whether VAT is also applicable?

5. If on above Fuel charges Vat is applicable, then Can we avail Vat input on purchase of petrol/diesel?”

As per the Chattisgarh AAR, diesel and petrol charges are out of the scope of GST as per Section 9(2) of the CGST Act, 2017. Therefore, GST is not charged on diesel and petrol charges. The petroleum products are still taxed as per the pre-GST regime.

The Central Government levies Central Excise Duty, and the State Governments charge VAT (Value Added Tax). Based on this, this transaction cannot be treated as a composite supply under Section 2(30) of the CGST Act, 2017 and the concept of bundled services does not apply in this case.

Additionally, the authority clarified that the rules related to the conditions and restrictions for claiming Input Tax Credit (ITC) are covered under Section 16 read with Section 17 of the CGST Act, 2017. As per these provisions, the ITC cannot be claimed on the VAT paid.