GST on Freight: Including Diesel Costs Provided by Clients
The Authority for Advance Ruling decided that transporters must include the value of client-provided diesel in their total taxable freight amount.
- Ruling
- No. STC/AAR/10/2018, dated 26/03/2019
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Transporter asked if client-provided diesel is part of taxable freight value.
- Authority ruled the total value must include the cost of provided diesel.
- Diesel is considered an integral part of the transportation service provided.
In short
The company asked if they should pay Goods and Services Tax (GST) on the full freight amount when their client pays for the diesel separately. The tax authority decided that because the diesel is essential to the transport service, its value must be added to the freight charges to calculate the correct tax.
What has changed
How it worked before
Many transporters assumed that if a client directly pays for or provides fuel, that cost is not part of the service provider's taxable turnover.
What has changed
The ruling confirms that under the Central Goods and Services Tax (CGST) Act, any cost incurred by the recipient that the supplier is otherwise liable to pay must be included in the taxable value. In practice, you must now calculate GST on the combined value of your service fee and the cost of the fuel provided by your client.
Who this affects
Transporters and logistics businesses who receive fuel or other essential inputs directly from their clients.
An example
A logistics firm transports goods for a factory that pays for the diesel directly. The firm previously only charged GST on their service fee. Based on this ruling, the firm should now include the value of that diesel in their taxable invoice amount to avoid potential tax shortfalls.
What you should do
Review your transport contracts to see if clients provide fuel or other materials. This ruling only binds the specific business that asked the question and their local tax office. You should consult with your tax advisor to see if this logic applies to your specific contract terms before changing your billing.
If you do nothing
If you exclude these costs and the tax department disagrees, you may face a demand for unpaid tax plus interest and penalties. Relying on a ruling that does not apply to your specific case can lead to costly disputes during an audit. Always verify your tax position with a professional rather than assuming one ruling sets a universal rule.
The terms explained
- Taxable value
- The total amount on which GST is calculated and paid to the government.
- Service recipient
- The person or business that hires you and pays for your services.
- Advance ruling
- A formal decision from tax authorities on how GST laws apply to a specific business situation.
The ruling in detail
Authority for Advance Ruling
Shri Navodit Agarwal
No. STC/AAR/10/2018, dated 26/03/2019 · Chhattisgarh
Questions before the authority
- Do we need to charge GST on Freight amount excluding diesel cost or on total amount which is inclusive of diesel cost?
Facts
The applicant is a transporter engaged by M/s Shree Raipur Cement to transport cement and clinkers. Under their agreement, the cement company provides the diesel required for the transportation vehicles. The applicant sought a ruling on whether the cost of this diesel, provided by the recipient, should be included in the taxable value of the freight service for GST purposes.
Ruling
| Question | What the authority ruled |
|---|---|
| Inclusion of diesel cost in taxable value | Included The total freight amount inclusive of diesel cost is subject to GST. |
The Authority ruled that the applicant must charge GST on the total freight amount, which includes the cost of the diesel provided by the service recipient. The value of the diesel must be added to the freight charges to determine the taxable value of the supply.
Reasoning
The Authority relied on Section 15(2)(b) of the CGST Act, 2017, which mandates that any amount the supplier is liable to pay but which has been incurred by the recipient and not included in the price is includible in the value. It concluded that the diesel provided by the recipient forms an integral component of the transportation service. Therefore, the cost of such diesel must be added to the taxable value of the services provided. The ruling also referenced the definition of supply under Section 7(1) and consideration under Section 2(31).
Provisions relied on
- Section 2(31) of the CGST Act, 2017
- Section 7(1) of the CGST Act, 2017
- Section 15(2)(b) of the CGST Act, 2017
- Section 97 of the CGST Act, 2017
- Section 98 of the CGST Act, 2017
For the practitioner
This ruling clarifies that **input goods provided by a service recipient** must be included in the taxable value of the service if they are essential to the service delivery. Practitioners should advise clients that they cannot exclude the value of recipient-provided fuel from their taxable freight turnover. It settles the valuation treatment for **third-party provided inputs** in transportation contracts.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/chhtgrh-10_2018-mr.navodit_agarwal.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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