AAR: Govt subsidy for solar projects not part of GST value. Clarification on GST liability post-subsidy deduction.

The Authority for Advance Ruling (AAR) ruled that the subsidy provided by the government should not be included in the value of supply for GST purposes in the context of a solar project. The taxable value for GST calculation should be determined after deducting the subsidy from the system cost, with the GST liability based on this reduced value. Additionally, it was clarified that there would be no impact of Section 17(2) of the CGST Act when deriving the taxable value after subtracting the subsidy amount. The applicant must pay the GST amount included in the subsidy to the government as per constitutional and statutory provisions.

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Issues Involved:
1. Whether subsidy should be reduced for arriving at the ex-factory value to collect GST on goods supplied under the rooftop solar project.
2. Implications of Section 17(2) of the CGST Act if the taxable value is derived after subtracting the subsidy amount from the system price.

Detailed Analysis:

Issue 1: Reduction of Subsidy for GST Calculation
The applicant, M/s. Greenbrilliance Renewable Energy LLP, supplies solar photovoltaic panels and Solar EPC services and is a channel partner under the Surya Gujarat Yojna. The applicant inquired whether the subsidy provided under this scheme should be reduced from the system cost to arrive at the taxable value for GST purposes.

The Authority for Advance Ruling (AAR) noted that the subsidy provided by the government should not be included in the value of the supply to arrive at the taxable value as per Section 15(2)(e) of the CGST Act. The subsidy is given by the State/Central Government and disbursed through DISCOMs, which act as facilitators. Therefore, the taxable value on the tax invoice issued to the customer should be calculated after deducting the subsidy from the system cost, and the GST liability should be on this reduced taxable value.

Issue 2: Implications of Section 17(2) of the CGST Act
The applicant sought clarification on the implications of Section 17(2) of the CGST Act if the taxable value is derived after subtracting the subsidy amount from the system price. Section 17(2) pertains to the reversal of input tax credit (ITC) when a taxpayer is making both taxable and exempt supplies. However, in this case, the supply of solar systems is a taxable supply, and the deduction of the subsidy from the system price to arrive at the taxable value does not change the nature of the supply. Therefore, there is no implication of Section 17(2) in this context.

Findings:
The AAR confirmed that the subsidy portion provided by the government should not be included in the value of supply for GST purposes. The rates quoted in the EOI and the subsequent agreements are inclusive of GST, meaning the subsidy is also calculated on a rate inclusive of GST. As per Article 265 of the Constitution of India and Section 76(1) of the CGST Act, the applicant must pay the GST amount included in the subsidy to the government.

Ruling:
1. The taxable value on the tax invoice issued to the customer shall be arrived at after deducting the subsidy from the system cost, and the GST liability shall be on this taxable value.
2. There shall be no implication of Section 17(2) of the CGST Act if the taxable value is derived after subtracting the subsidy amount from the system price.
3. The applicant is required to pay to the government the GST amount included in the subsidy, as detailed in the ruling.

This comprehensive analysis ensures that the legal terminology and significant phrases from the original text are preserved while providing a thorough understanding of the judgment.

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