Ruling: Subsidy for food excluded from CGST consideration

The Authority for Advance Ruling determined that the subsidy provided by the State Government for supplying food and drinks to end-users should be excluded from the consideration under the CGST Act. The ruling clarified that the consideration for turnover calculation should be based on the amount collected from beneficiaries, inclusive of tax, with the tax fraction deducted as the collected amount already included tax. Consequently, the subsidy amount received from the Government of Karnataka for supplying food at the Indira Canteens would not be considered part of the turnover subject to tax.

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Issues:
1. Whether the subsidy received from the state government would form part of consideration under section 2(31) of the CGST ActRs.

Analysis:
The applicant, a Partnership firm engaged in supplying food and beverages, sought an advance ruling regarding the treatment of subsidies received from the Government of Karnataka in relation to their contract for supplying food in various districts. The applicant believed that the subsidy received should not be considered as part of the valuable consideration for GST liability calculation. The applicant's concern was whether the subsidy amount should be included while computing the "consideration" liable to GST.

During the personal hearing, the applicant's representative argued that the subsidy was provided by the government as part of a program to offer low-cost subsidized food to the weaker sections of society through the Indira Canteen scheme. The applicant maintained that they were discharging GST liability based on the actual price collected from the beneficiaries, excluding the subsidy amount received from the government.

The Authority for Advance Ruling examined the agreements entered into by the applicant with the Deputy Commissioners of the districts for providing food services at the Indira Canteen. It was observed that the applicant collected a specified amount from beneficiaries, along with the subsidy available from the government, and submitted a consolidated bill at the end of each month.

Referring to the definition of "consideration" under section 2(31) of the CGST Act, the Authority concluded that the subsidy provided by the State Government for the supply of food and drinks to end-users should be excluded from the consideration. The ruling clarified that the consideration collected from the beneficiaries, inclusive of tax, would be the basis for turnover calculation, with the tax fraction deducted as the collected amount already included tax.

Therefore, the ruling stated that the subsidy amount received from the Government of Karnataka for supplying food to beneficiaries at the Indira Canteens would not form part of the turnover subject to tax. The consideration collected from the beneficiaries, inclusive of tax, would be liable to tax after deducting the tax fraction, as the collected amount already included tax.

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