18% GST on Financial Assistance as covered under ‘Consideration for Supply’: AAR [Read Order]

The Maharashtra Authority of Advance Ruling (AAR) held that 18% GST on Financial assistance, as it is covered under “consideration for supply”.

The Applicant, M/s Prettl Automotive India Pvt. Ltd is engaged in supply of electric transformers, static converters, electric wires/ cables for transmission of electricity, equipment for spark ignition, installation and commissioning services.

The Prettl Kabelkonfektion GmbH, (Prettl GmbH), Germany, Applicant’s holding company,

desires to join the “develoPPP.de programme” run by the German Federal Ministry for Economic Cooperation and Development. Pretti GmbH desires to provide financial assistance of 540,000 Euro to the Applicant under the said program.

The applicant has sought the advance ruling on the issue whether the financial assistance to be received by the Applicant are covered as consideration for supply and the activity is covered under the meaning of supply of services in terms of Section 7 of the CGST Act, 2017/MGST Tax Act, 2017.

The coram consisting of T.R. Ramnani and P.Vinitha Shekhar held that  the financial assistance to be received by the Applicant is covered as consideration for supply and the activity is covered under the meaning of supply of services in terms of Section 7 of the CGST Act, 2017/MGST Tax Act, 2017.

The AAR held that the same is not covered as “Zero Rated Supply” and does not qualifies as “export of service” under the provisions of Integrated Goods and Services Tax Act, 2017 and cannot be exported without payment of IGST.