Toll charges are included in the value of outward supply: Tamil Nadu Authority of Advance Ruling

The Authority of Advance Ruling (AAR), Tamil Nadu consisting of T.G. Venkatesh and K.Latha has ruled that the value of toll charges are being incidental expenses incurred while providing outward supply and the same is liable to be included in the value of outward supply of service.

In relation to the rental of road vehicles, including buses, coaches, cars, and other motor vehicles, the applicant is in the business of providing support services. The other transportation services are classified as HSN Code 996799, while the operator is classified as HSN Code 996601 and are subject to GST at the appropriate rates. It was observed that the Applicant company enters into contracts with their clients for services in respect of the pick-up of employees of general information technology companies, like Cognizant Technologies, pick up from specific point and drops them off at the company, and dropping them back to the points on return transports.

Further, the applicant uses their vans to transport computers, laptops, and accessories to various inter- and intra-state locations. The invoices on monthly basis were raised by the applicant and discharged the tax accordingly, the applicant pays toll charges collected by NHAI or State Highways at different locations and gets the actuals reimbursed from the clients by indicating the toll charges separately in the invoices raised, during the course of providing service.

An advance ruling on the issue was sought by the applicant and the value of toll charges is liable to be included in the value of outward supply of service.

It was held by the AAR and that the beneficiaries are liable to pay the toll as which is compulsorily levied on the vehicles. The cost of service provided to the service recipients, are the expenses incurred. Further, the reimbursement of cost is no disbursement but merely the recovery of a portion of the value of supply made to the recipients and the toll charges paid are to be included in the value of supply arising from the provision of service as incidental expenses. Therefore, the cost of toll charges, which are paid by the applicant and later reimbursed by their clients, should be included in the value of supply and on the entire value of the supply, including toll charges paid, tax shall be payable at the applicable rate.