The Gujarat Authority for Advance Ruling (AAR) ruled that the incentives received under “Atma Nirbhar Gujarat Sahay Yojna” are not Subsidy and hence GST is leviable on it.
The State Government announced the “Atma Nirbhar Gujarat Sahay Yojna” wherein Nagarik Sahakari Banks (including Banks registered under Multi State Cooperative Act) and Cooperative Credit Societies were to provide loans, without security upto Rs. I lakhs to small traders, middle class businessman, individual artisans and working class, @ 8% interest. Out of this 8% interest, 2% interest was to be paid by the customer (loanee) while the remaining 6% interest was to be borne by the Gujarat State Government.
The sole contention of the appellant is that the amount received by them under the heading ‘incentive’ as mentioned in the State Government Resolutions, the relevant extract of which is reproduced supra, is akin to ‘subsidy’ and hence not leviable to GST. The appellants further contend that subsidy would also not form a part of supply under Section 7(2), that it is not taxable under Schedule-III of CGST Act, 2017. The appellant has also relied upon the dictionary meaning of the word subsidy and incentive to drive home the point that both the words mean the same.
The next argument of the appellant is that the scheme is for the benefit of the public and not beneficial to an individual or private commercial enterprise and therefore the amount being paid by the Government over and above reimbursement of 6% interest is nothing but ‘subsidy’.
The dispute here is not in respect of reimbursement of 6% interest to the beneficiary. However, to equate this subsidy of 6% granted to the loanee, as a part of relief measure announced by the State Government on account of the pandemic situation, with the incentive granted to the Cooperative Banks and Cooperative Credit Societies, which solely depended on the performance in disbursing loans, is not a prudent argument in the first place.
A Two Member Bench of the Authority comprising Sameer Vakil, Member SGST and B V Siva Naga Kumari, Member CGST observed that “”We hold the subject incentive amount liable to GST The said incentive is not a subsidy and does not merit exclusion from valuation under Section 1 5(2)(e) of the CGST Act. The subject supply is covered at Section 7(1)(a) of the CGST Act and not at Section 7(2) of the CGST Act.”
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