Government subsidy not deductible in GST for imported machinery; Customs laws determine IGST value

The authority rejected the application for advance ruling on whether the subsidy from the Government of Karnataka should be reduced from the value of imported plant and machinery from China for levying GST. They clarified that the value for IGST levy on imports is determined by customs laws, and the question of reducing government subsidy from the import value for IGST payment does not fall under their purview.

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Issues:
1. Whether the subsidy from Government of Karnataka is to be reduced from the value of import of plant and machinery from China for levying GSTRs.
2. Whether valuation of supply of goods under GST Act excludes government subsidyRs.
3. Whether GST will be levied on imports of plant & machinery after reducing Government subsidy from CIF value of importsRs.

Analysis:
1. Admissibility of the Application: The issue pertains to determining the liability to pay tax on goods or services, making it admissible under Section 97(2)(e) of the CGST Act 2017.

2. Brief Facts: The applicant, a construction firm and registered PWD Civil Government Contractor, plans to set up a silk reeling industry in Mysore by importing machinery from China, with 90% subsidy sanctioned by the Department of Sericulture, Government of Karnataka.

3. Applicant's Interpretation: The applicant argues that as per Section 15 of the CGST Act, government subsidies do not form part of taxable supply valuation. Hence, GST should only apply to the amount paid by the beneficiary, i.e., 10% of the total invoice value.

4. Findings & Discussion: The authority clarifies that the provisions of the CGST Act and KGST Act are similar, except for specific provisions. They consider the applicant's submissions and interpretation of law regarding the subsidy on imported machinery.

5. Legal Interpretation: The authority cites relevant sections of the IGST Act 2017, emphasizing that the importer must pay tax on reverse charge basis for imported goods. The value for levy of IGST on imports is determined by the Customs Act, 1962, and Customs Tariff Act, 1975.

6. Decision: Since the value for IGST levy on imports is governed by customs laws, the authority rules that the question of reducing government subsidy from the import value for IGST payment does not fall under their purview. Consequently, the application for advance ruling is rejected.

This detailed analysis highlights the applicant's query regarding the treatment of government subsidies in the context of GST on imported machinery, the legal framework governing IGST on imports, and the authority's decision based on the applicable laws and regulations.

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