GST applicability on Interest Subvention receives from nationalized bank

[Sandeep Anand]

Sir,

Require a clarification whether the GST is applicable on interest subvention received from a bank for reducing the effective interest of Working capital loan (Packing credit facility). Any section or case laws supporting the above fact

Also there is a clarification required that, since GST is not applicable for Interest on working capital loan, whether the subvention received for the same is applicable for GST

[KASTURI SETHI]

Interest subvention is a subsidy and GST on subsidy is not applicable if granted by Central Govt. or Statement. See the definition of 'Consideration' under Section 2 (31) of CGST Act. In your case, it is taxable. Peruse the following decision of AAR:-

2019 (26) G.S.T.L. 269 (A.A.R. - GST) = 2019 (7) TMI 810 - AUTHORITY FOR ADVANCE RULING, TAMILNADU IN RE : DAIMLER FINANCIAL SERVICES INDIA PVT. LTD.

[Sandeep Anand]

Sir,

In our case subsidy is received from Bank as per RBI Scheme (interest equalization scheme)

Since RBI comes under Central Government, whether we require to pay GST.

[KASTURI SETHI]

Bank is not fully Govt. body. It is Govt of India undertaking.

[KASTURI SETHI]

Dear Querist, You are right. RBI is fully Govt. All other banks are Govt.of India undertakings. Interest subvention is actually borne by Central Govt. Bank is only via medium (channel) through which you get interest subvention. Discussed the whole issue with retired Bank Officer. Since this subsidy is borne by Central Govt., GST is NOT applicable.

[Sandeep Anand]

Thank you Sir for your valuable information

AI Summary

Interest subvention subsidy borne by Central Government is not subject to GST when routed through banks. GST liability on interest subvention depends on whether the subsidy is funded by the Central Government. If the subvention under an interest equalization scheme is borne by the Central Government and the bank only channels the payment, the subsidy does not constitute taxable consideration under the GST law; conversely, a subsidy funded by a non-government entity may be taxable.