Dear Experts,
We have received the Integrated Development of Leather Sector (IDLS) subsidy from the government, which we treated as income. However, during our departmental audit GST officers inquired why we have not charged or discharged GST on this subsidy. Our understanding is based on section 2(31) of the GST Act, which excludes government subsidies from GST.
Unfortunately, the officers are not accepting this explanation. To resolve this issue, we would like to ask if you could provide any notifications or circulars that clarify the GST treatment of government subsidies and confirm that they should not be subjected to GST charges.
Regards,
S Ram
Leather sector subsidy treated as income; dispute over GST exclusion under section 15(2)(e) and subsidy definition A taxpayer received a government leather-sector subsidy and treated it as income without charging GST; tax officers disputed this. Forum respondents noted statutory language excluding government subsidies from taxable value (section 15(2)(e) read with the GST definition of subsidy) and pointed to a central board circular reiterating that central/state government subsidies are not includible in supply value. Several advance rulings and higher-court decisions have supported taxpayers, though authorities may challenge whether the payer qualifies as 'government' or question reliance on circulars; resolving the dispute hinges on facts and applicable precedents. (AI Summary)
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