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Service Station Licence fee recovery- Can ITC on GST charged be availed?

SSLF
Good Day! to all, I have been frequently asked to answer whether an ITC can be availed on the GST charged on Service Station Licence fee.

What is that Service station Licence fee( SSLF) mean?

Its a licence fee charged by the PSUs such as IOCL, HPCL, BPCL to their dealers who operate the retail petrol stations. This is a licence specifically issued for the dealers in the business of trading in petrol and diesel in retail pump stations as its regulated by the Industry. Whereas this is not required for other business activities conducted in the same pump station such sale of Lubricant oils, Mineral water, ATM rent, and Take-away stores.

Why GST is charged as the Petrol and Diesel are outside the GST scope?

Petrol and Diesel as “goods” are outside the purview of GST under sec 9(2) but still part of VAT compliance. Licence fee recovery is more of service which is subject to GST taxation.

Can we avail ITC on GST Charged in SSLF?

Before we answer, lets look at few things first to conclude logically.
  • SSLF is specific charge incurred for the purposes trading in petrol or diesel which is Non-GST supply under sec 9(2) of CGST Act, taxable only under VAT Act
  • Sec 17(2) clearly restricts Input tax so much as attributable for taxable under GST but includes Zero-rate Supplies
  • Sec 2(47) defines “exempt supply”  as supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply
  • Anything charged under VAT is non-taxable under GST, thus Petrol and diesel are non-taxable supplies as far as GST is concerned
  • There are arguments saying that Lubricants are subject to GST, can’t we still avail ITC on SSLF? Trading in Lubricants has got no restrictions or regulations as like Petrol or diesel as you get that in any automobile shops. Therefore, Its safely conclude that SSLF is directly related to trading in Petrol or Diesel only.
To conclude with above aspects, its apparent to conclude that GST suffered in SSLF is no way related to GST supplies, one should not avail ITC on the same. There are versions of different thoughts, one of which is to treat that as common credit, reverse the ITC apportion to VAT supply under rule 42. The point is it’s not common credit, specific to VAT supplies only, thus rule 42 is not at all relevant in this context.

 

Hope you find this article useful.
CA LDR
Author can be reached at admin@tngstp.com for further queries.


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