TaxTMI 
TaxTMI 
2023 (9) TMI 1122
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.... Act, 2017 (hereinafter referred to as the CGST Act and KGST/SGST Act respectively). The applicant is a manufacturer of machineries and industrial boilers. 3. The applicant has sought advance ruling in respect of the following question:- i. Whether the subsidy received from the Central / State Government to be excluded from the value for the purpose of arriving at the GST liability? 4. Admissibility of the application: The question is about the "determination of the liability to pay tax on any goods or services or both" and hence is admissible under Section 97(2) (e) of the CGST Act 2017. 5. BRIEF FACTS OF THE CASE: The applicant furnishes some facts relevant to the issue: 5.1 The applicant has stated that they intend to manufacture and supply plant and machineries to Chinnapuri Silks (Recipient) whose estimated cost is Rs. 23,19,100/-(excluding GST) and cost is based on the quotation. The recipient of machinery is eligible for 90% subsidy grants from Central Government and State Government. The total amount of subsidy is Rs. 20,87,280/- (being 90% of the costs of the Plant and Machinery). The amount of subsidy will be deposited in an Escrow account opened with Canara Bank wh....
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....nd can contribute towards this policy objective and local content can be increased through partnerships with local companies establishing production units in India or with Indian suppliers. The said order is issued in pursuant to Rule 153 (Ui) of the General Financial Rules 2017. The said order also defines the supplier as local supplier (manufacturer and supplier) and also the procuring entity such as the Ministry or Department or attached or subordinate office of or autonomous body controlled by the government of India and includes government companies. The standing committee consisting of Secretary, DPIIT as Chairman, and the Members consists of Secretary, Commerce, Secretary, Ministry of Electronics and Information Technology, Joint Secretary (Public Procurement), Department of Expenditure and Member Convener as Joint Secretary, DPIIT will oversee the implementation of the Order. The Government invites tender which allows bidding of the documents, consisting of Financial Bid and technical Bid with certain conditions regarding self-declaration indicating the percentage of machinery etc. Here the Tender inviting Authority and Procurement Authority is the Government. The tender ....
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....10% paid by them as expenditure. It is not a case where the beneficiary incur the full 100% of the cost of the machinery and subsequently government pay or reimburse the 90% of the cost to the beneficiary instead the 90% of the cost is incurred by the government directly. Just because an ESCROW account is opened and the subsidy amount is deposited and payment is monitored, it cannot be construed that the subsidy is not received from the government. The definition and meaning of "consideration" as stipulated in Section 2(31) of the CGST Act, 2017 (In this Act, unless the context otherwise requires,) is as under- "Consideration-(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of the supply of goods or services or both whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; On perusal of the said definition, it is clear the consideration shall not include any subsidy given by the Central Government or a State Government. It is categorically mentioned that consideration shall not include any subsidy given by the Central Government....
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....cable in this case as the Government has paid the subsidy to the supplier through escrow account and the remaining 10% of the amount is paid by the beneficiary. Hence the 90% of the amount is not includable while calculating the GST and 10% of the amount which is paid by the beneficiary includable for GST purposes. In Indira canteen the subsidy is granted by the government to the supplier only after they furnish the data of the supplies made and collection of the amount from the beneficiary. In case if it is held that the subsidy amount is taxable in this case, then the subsidy amount received from the Government of Karnataka for supply of service of food to the ultimate beneficiary in Indira Canteen by the applicant is also to be included to the definition of consideration and would form the part of the turnover on which the tax is liable to be paid. In such a situation, the intention of the legislation will be defeated. Then the rulings become contradictory to each other. In Advance Ruling Number KAR ADRG. 16/2020 dated 23.03.2020 in respect of M/s. Megha Agrotech Private Limited wherein supplier claims that, he has no role to play in the transaction between the Government and ....
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....napuri Silks (Recipient) whose estimated cost is Rs. 23,19,100/- (excluding GST). The Applicant states that recipient is eligible for 90% subsidy from Central Government and State Government. The Applicant states that the recipient is insisting that the supplier shall charge GST on the total invoice amount as reduced by the subsidy amount which is in line with Section 2(31) and Section 15(2)(e) of CGST Act. Hence the Applicant wants to know whether the subsidy received from the Central / State Government to be excluded from the value for the purpose of arriving at the GST liability. 10. Now we invite reference to Section 2(31) which defines 'consideration' and the same is reproduced below. 2(31) "consideration" in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the induce....
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....cluded in the value of the supply. For determining the value of taxable supply, sub-sections (1) and (2) of Section 15 are to be read in conjunction. As per sub-section 15(1), taxable value shall be the transaction value when the supplier and recipient are not related and price is the sole consideration for supply. Sub-section 15(2) expands the scope of value of supply so as to include such values mentioned in the clauses(a) to (e) of the sub-section. Section 15(2)(e) specifically stipulates that the value of supply shall include subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Thus, Section 15(2)(e) seeks to expand the value of supply so as to include subsidies which are directly linked to the price with a condition that subsidies provided by Central Government and State Governments are to be excluded. We find that the phrase providing for exclusion of subsidies by Central Government and State Governments will apply only when two conditions are satisfied viz., (i)when such subsidies are to be added to the transaction value and (ii)when such subsidies are directly linked to the price or affects the price of supply.....