Subsidy received from central/ state government cannot be excluded from value of supply as same is not affecting price of supply: AAR
cannot be excluded from value of supply – value of supply – not affecting price of supply – price of supply – Authority For Advanced Ruling – Tax News – TAXSCAN
cannot be excluded from value of supply – value of supply – not affecting price of supply – price of supply – Authority For Advanced Ruling – Tax News – TAXSCAN
The Karnataka Authority for Advance Ruling (AAR) has ruled that the subsidy received from the central/state government could not be excluded from the value of supply, as it does not affect the price of supply.
Hitze Boilers Private Limited, the manufacturer of machinery and industrial boilers, sought an advance ruling regarding the exclusion of subsidies from the value for GST liability calculation. The applicant plans to manufacture and supply plant and machinery to Chennapuri Silks, with an estimated cost of Rs.23,19,100/ (excluding GST), based on a quotation.
The recipient is eligible for a 90% subsidy grant from the Central and State Governments, totaling Rs.20,87,280/ (90% of the Plant and Machinery costs). This subsidy will be deposited in an Escrow account at Canara Bank, controlled by the recipient, and then transferred to the supplier, M/s. Hitze Boilers Private Limited.
The recipient insists that GST should be charged on the total invoice amount, excluding the approved subsidy, citing Section 2(31) of the CGST Act. In a personal hearing, the applicant argued that the subsidy amount must be excluded from the value of supply, referring to Sections 2(31) and 15(2)(e) of the CGST Act 2017.
The Authority observed that the supplier and recipient are not related, and the transaction value is the sole consideration for the supply. The supplier issues an invoice for the full amount, regardless of the subsidy. The machinery supply contract is between the applicant and the recipient, M/s Chinnapuri Silks.
The Authority, after reviewing the submissions, determined that subsidies have little impact on supply prices. The exclusion specified in Section 15(2)(e) is not applicable, and subsidies from the central and state governments cannot be disregarded when calculating the value of supply.
Therefore, the Authority ruled that the subsidy received from the central/state government could not be excluded from the value of supply, as it does not affect the price of supply.
To Read the full text of the Order CLICK HERE
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