Subsidy receipts under independent government schemes were held outside taxable turnover because they were not part of sale consideration.

Subsidy receipts under the fertiliser and petroleum subsidy schemes were held not to form part of taxable turnover under the Kerala Value Added Tax Act, 2003. Explanation VII to the turnover definition was construed as covering only cases where goods are sold below purchase price and the dealer later receives reimbursement of the balance sale price. Because the subsidies were paid under independent schemes and were unrelated to the bargain between seller and purchaser, they were treated as amounts outside the sale consideration and outside turnover. The issue was decided in favour of the assessee.

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Issues: (i) Whether subsidy received by dealers under the fertiliser and petroleum subsidy schemes formed part of taxable turnover under the Kerala Value Added Tax Act, 2003, in the light of Explanation VII to Section 2(iii).

Issue (i): Whether subsidy received by dealers under the fertiliser and petroleum subsidy schemes formed part of taxable turnover under the Kerala Value Added Tax Act, 2003, in the light of Explanation VII to Section 2(iii).

Analysis: The turnover definition in Section 2(iii) was held to be materially similar to the earlier sales tax statute, and Explanation VII was construed as applying only where a dealer sells goods at a price lower than the purchase price and later receives an amount towards reimbursement of the balance price. The subsidy under the Fertiliser (Control) Order and the PDS kerosene and domestic LPG scheme was found to be paid under independent governmental schemes, unrelated to the bargain between seller and purchaser and not as reimbursement of the balance sale price. The subsidies were therefore treated as amounts outside the sale consideration and outside the turnover concept addressed by Explanation VII.

Conclusion: Subsidy receipts did not form part of taxable turnover and the issue was decided in favour of the assessee.

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