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A fair price shop is licensed to sell public distribution commodities against ration documents i.e., a fair price shop supplies S.K.Oil, along with other public distribution commodities, to the ration card holders only. The applicant, on the other hand, procures S.K.Oil from the Oil Marketing Company and supplies the same to the dealers who in turn supplies it to the consumers i.e., the ration card holders. Therefore, the applicant cannot be regarded as a ‘fair price shop’.

Valuation of supply— In the instant case, the applicant is an agent of Indian Oil Corporation Limited (IOCL) and is engaged in the distribution of Superior Kerosene Oil (SKO) for domestic purposes to fair price dealers.

The applicant supplies the goods only to dealers which are permitted / approved by the Director of Consumer Goods, Department of Food and Supplies, Government of West Bengal. Further, the price at which the applicant can supply as an agent along with the elements of such prices are also fixed by the District Controller, Food and Supplies, Government of West Bengal.

Question raised for advance ruling is as follows—

I. Whether the applicant in the capacity of an agent would be covered within ‘Fair Price shops’ for the purpose of claiming the exemption?

II. Whether the invoice raised by the applicant to the dealers under PDS would be covered in service ‘to State Government’?

III. Whether the other charges like agent’s commission, agent’s transport charges, stationery charges, H & E Loss etc. would be chargeable to GST or treated as exempt?

IV. Whether the supply of SKO along with other charges would be treated as a composite supply wherein the principal supply would be the supply of SKO?

V. If these other charges are taxable under GST, what would be the rate of GST applicable on it?

VI. If these other charges are exempt under GST, would there a reversal of ITC attributable to such exempt supplies? Will the GST charged on the base price of SKO by IOCL from the applicant be treated as common input or input services for calculation of ITC reversal under Rule 42 of the CGST Rules 2017?

The main issue involved in the instant case is to determine the value of supply of Superior Kerosene Oil (SKO) made by the applicant for domestic purposes to fair price dealers in terms of the license granted by the Director of Consumer Goods, Government of West Bengal.

In the instant case, the applicant admittedly charges, other than price of kerosene, commission, transportation charges, stationery charges, compensation on handling & evaporation loss, to the recipient of goods i.e., dealers which are permitted / approved by the Director of Consumer Goods, Department of Food and Supplies, Government of West Bengal.

This authority is of the view that the other elements involved in the instant supply shall not qualify for exemption. Therefore, the amount received by the applicant in this regard shall form a part of the value of supply on which tax shall be levied in terms of sub-section (1) of Section 9 of the GST Act. The value of supply, as per clause (c) of sub-section (2) of Section 15, shall include ‘incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services.’

Held that— The applicant is found not to be a ‘Fair Price Shop’. The applicant supplies to the S.K.Oil dealers under PDS and not to the State Government.

The other charges like agent’s commission, agent’s transport charges, stationery charges, H & E Loss etc. form a part of the value of taxable supply and therefore shall attract tax.

The applicant has been licensed to supply Superior Kerosene Oil which is supplied with transportation services. As a result, the supply can be regarded as a composite supply in terms of clause (30) of section 2 of the GST Act.

The supply shall attract tax @ 5% vide entry serial number 164 of Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 on the entire value of supply.

As the supply is held taxable and tax would be levied on the entire value of supply, the applicant would not require to reverse input tax credit on account of exempt supplies.