GST—Value of Supply & Government Subsidy Routed via PSU

[Kumar Gaurav]

If a company sells goods to Government and receives a price-linked subsidy from a PSU on behalf of the Government (not directly from the Govt.), should such subsidy be excluded from the value of supply under Section 15(2)(e) of the CGST Act (which excludes subsidies provided by Central/State Government)

[KASTURI SETHI]

In this scenario, subsidy cannot be excluded from the value of supply. An PSU is not fully Govt. The phrase, "on behalf of" is a bottleneck here.

[Sadanand Bulbule]

Also refer the following:

2024 (2) TMI 351 - MADRAS HIGH COURT - M/s. Supreme Paradise Versus Assistant Commissioner (ST) North 1 Circle, Tirupur.

 

[KASTURI SETHI]

Dear Sir Ji,

In my view, subsidy and discount are different concepts/terms.

Your opinion for enrichment of my knowledge please.

[Sadanand Bulbule]

Dear Sir ji

Your understanding is doctrinally sound:

Discount is a commercial pricing adjustment. Subsidy is a sovereign or institutional financial assistance. 

[KASTURI SETHI]

Dear Sir Ji,

I am highly thankful to you for your comprehensive reply. Your prompt reply is highly appreciated. 

[Shilpi Jain]

It would be relevant to see the terms and conditions of the contract, if any, to comment further.

AI Summary

Subsidy routed via PSU may not be excluded from value of supply under GST where PSU does not act as the government. Whether a price linked payment routed by a public sector unit on behalf of the Government is excluded from the value of supply under the government subsidy exclusion turns on the payment's legal character, the PSU's role (sovereign agent versus independent payer), and the contract terms allocating the payment; commercial discounts are distinct from sovereign or institutional subsidies and cannot be conflated.