Case Of: M/s. Balaji Ready Mix Concrete Pvt. Ltd.
Issued By: Andhra Pradesh High Court
Order No: WP No. 11644 of 2023
Date: 05th Feb 2026

Judgement

Free Materials Supplied by Contractee Cannot Automatically Form Part of Taxable Value Under GST

Observations

The petitioner was engaged in supplying Ready-Mix Concrete (RMC) for infrastructure works where the contractee provided certain key materials such as cement and other inputs free of cost for use in the manufacturing process.

During assessment proceedings, the GST department took the view that the value of materials supplied free by the contractee should be added to the taxable value of the RMC supplied by the petitioner.

Based on this view, the department issued a demand order enhancing the value of supply, treating the free materials as part of consideration linked to the supply of concrete.

The petitioner challenged the demand before the High Court, contending that materials supplied free by the recipient cannot automatically form part of the 
transaction value, particularly when no payment or contractual consideration was attributable to them.

Findings

The Court examined the valuation framework under Section 15 of the CGST Act, which provides that GST is payable on the transaction value, being the price actually paid or payable for the supply of goods or services.

It observed that additional amounts can be included in taxable value only where they qualify as consideration for the supply and have a clear nexus with the transaction between the supplier and recipient.

In the present case, the Court noted that the materials were supplied by the contractee independently and not as part of the price payable to the supplier for the RMC supplied.

Accordingly, the Court held that the value of free-supplied materials could not be automatically included in the taxable value, and the demand order passed by the department was set aside.

Original Order