Incentive Amount Subject to GST, Not a Subsidy

The Authority ruled that the incentive amount received is liable to GST, not considered a subsidy, and does not qualify for exclusion under Section 15(2)(e) of the CGST Act. The incentive is considered a supply under Section 7(1)(a) and not covered under Section 7(2) of the CGST Act.

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Issues Involved:
1. Whether the incentives received under "Atma Nirbhar Gujarat Sahay Yojna" are considered as subsidy and not chargeable to tax.
2. Whether the incentive received under the said scheme could be considered as a supply of service under the provisions of Section 7 of the CGST Act.
3. Whether the incentive received under the said scheme, if considered as a supply, would be covered under Sub Section 2 of Section 7 of the CGST Act.
4. Whether the incentive received under the said scheme could be excluded from the value of taxable supply under clause (e) of Sub Section 2 of Section 15 of the CGST Act, 2017.

Detailed Analysis:

1. Incentives as Subsidy and Taxability:
The applicant argued that the incentive received under "Atma Nirbhar Gujarat Sahay Yojna" should be considered a subsidy and thus not chargeable to tax as per Section 2(31) of the CGST Act. They highlighted that subsidies given by the Central or State Government are not included in the definition of consideration. The applicant cited definitions from dictionaries and legal texts to support their claim that the incentive is a subsidy meant to aid the bank in providing loans at reduced interest rates.

2. Incentives as Supply of Service:
The applicant contended that the incentive received does not fall under the definition of the scope of supply as per Section 7(2) of the CGST Act. They argued that the incentive does not constitute a supply of goods or services and should not be taxed. They also mentioned that the incentive is not covered under the activities or transactions specified in Schedule III of the CGST Act.

3. Coverage under Section 7(2) of CGST Act:
The applicant claimed that the incentive should be treated as an actionable claim, which is neither a supply of goods nor a supply of services as per Schedule III of the CGST Act. They argued that the incentive received by fulfilling the conditions of the scheme creates a beneficial interest recognized by civil courts, thus making it an actionable claim.

4. Exclusion from Value of Taxable Supply:
The applicant submitted that the incentive should be excluded from the value of taxable supply under clause (e) of Sub Section 2 of Section 15 of the CGST Act, 2017. They argued that the incentive is akin to additional interest on the loan amount sanctioned and should be exempt from GST.

Revenue’s Submission:
The Revenue submitted that services of extending deposits, loans, or advances by banks fall within SAC code 997113 and are exempt from GST as per Notification No. 12/2017-CT (Rate). They acknowledged that reimbursement of part interest by the State Government is a subsidy and thus excluded from consideration as per Section 2(31) of the CGST Act. However, they did not address the specific issue of the one-time incentive.

Findings and Ruling:
The Authority clarified that the provisions of the CGST Act and GGST Act are similar and considered all submissions. They noted that the Revenue misconstrued the question and focused on the 6% interest paid by the State Government instead of the one-time incentive. The Authority found that the incentive is provided to motivate and encourage the applicant to undertake the scheme and is based on the performance of loan disbursement. They held that the incentive is a consideration and income for the applicant, not a subsidy. The Authority emphasized that the incentive is not passed on to the customers but benefits the applicant directly. They concluded that the incentive amount is taxable under GST and does not merit exclusion from valuation under Section 15(2)(e) of the CGST Act.

Conclusion:
The Authority ruled that the incentive amount received by the applicant is liable to GST, is not considered a subsidy, and does not qualify for exclusion under Section 15(2)(e) of the CGST Act. The incentive is considered a supply under Section 7(1)(a) and not covered under Section 7(2) of the CGST Act.

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