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2021 (11) TMI 392 - AAR - GSTValuation - subsidy from Government of Karnataka, to be reduced from the value of import of plant and machinery from China or not - levy of GST on imports of plant machinery after reducing Government subsidy from the CIF value of the imports - HELD THAT - For the import of goods, the importer has to pay custom duty and IGST as per Customs Act, 1962 and Customs Tariff Act, 1975 on the value as determined under the Customs Tariff Act, 1975 at the point when the duties of customs are levied on the said goods. Thus it is evident that the value for levy of IGST on imports is governed by Customs Act, 1962 and Customs Tariff Act, 1975. The applicant is importing silk reeling machineries from China and is supposed to pay IGST on import of goods. The applicant wishes to know whether the subsidy given is to be reduced from the value of import of plant and machinery to pay IGST. Since the value for levy of IGST on imports is governed by Customs Act, 1962 and Customs Tariff Act, 1975 answering the questions of the applicant does not come under the purview of this authority. The application filed by the applicant for advance ruling is disposed off as rejected.
Issues:
1. Whether the subsidy from Government of Karnataka is to be reduced from the value of import of plant and machinery from China for levying GST? 2. Whether valuation of supply of goods under GST Act excludes government subsidy? 3. Whether GST will be levied on imports of plant & machinery after reducing Government subsidy from CIF value of imports? Analysis: 1. Admissibility of the Application: The issue pertains to determining the liability to pay tax on goods or services, making it admissible under Section 97(2)(e) of the CGST Act 2017. 2. Brief Facts: The applicant, a construction firm and registered PWD Civil Government Contractor, plans to set up a silk reeling industry in Mysore by importing machinery from China, with 90% subsidy sanctioned by the Department of Sericulture, Government of Karnataka. 3. Applicant's Interpretation: The applicant argues that as per Section 15 of the CGST Act, government subsidies do not form part of taxable supply valuation. Hence, GST should only apply to the amount paid by the beneficiary, i.e., 10% of the total invoice value. 4. Findings & Discussion: The authority clarifies that the provisions of the CGST Act and KGST Act are similar, except for specific provisions. They consider the applicant's submissions and interpretation of law regarding the subsidy on imported machinery. 5. Legal Interpretation: The authority cites relevant sections of the IGST Act 2017, emphasizing that the importer must pay tax on reverse charge basis for imported goods. The value for levy of IGST on imports is determined by the Customs Act, 1962, and Customs Tariff Act, 1975. 6. Decision: Since the value for IGST levy on imports is governed by customs laws, the authority rules that the question of reducing government subsidy from the import value for IGST payment does not fall under their purview. Consequently, the application for advance ruling is rejected. This detailed analysis highlights the applicant's query regarding the treatment of government subsidies in the context of GST on imported machinery, the legal framework governing IGST on imports, and the authority's decision based on the applicable laws and regulations.
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