2023 (9) TMI 1122 - AAR - GST

Valuation of supply - subsidy received from the Central / State Government to be excluded from the value for the purpose of arriving at the GST liability - HELD THAT - In the instant case, the supplier and the recipient are not related and the price is the sole consideration for the supply and thus the transaction value becomes the value of supply. The transaction value is the value of supply and the supplier raises the invoice for full amount i.e. for the full value of the goods being supplied. In the instant case, it is observed that the contract for supply of machinery is between the Applicant and the recipient i.e. M/s Chinnapuri silks; the applicant supplier raises the invoice for the full contract price and even if the recipient is not provided subsidy, the contract price is still recoverable from the recipient. Subsidies provided by State Government or Central Government in the escrow account are not separately recoverable by the Applicant, but are part of the price payable by the recipient. Thus, there does not arise a situation where the subsidies are to be added separately to the transaction value or value of supply payable by the recipient. Also, for the same reason, the subsidy is not affecting the price of supply. Only the subsidies provided by Central Government and State Governments which are directly linked to the price and affects the price of supply are not a part of value of supply. Hence the exclusion provided in Section 15(2)(e) is not applicable in the instant case and the subsidies provided by Central Government and State Governments cannot be excluded in determining the value of supply. The subsidy received from the Central / State Government cannot be excluded from the value of supply as the same is not affecting the price of supply.

Summary

Issues Involved:
1. Whether the subsidy received from the Central/State Government is to be excluded from the value for the purpose of arriving at the GST liability.

Summary:

Admissibility of the Application:
The application is admissible under Section 97(2)(e) of the CGST Act, 2017 as it pertains to the "determination of the liability to pay tax on any goods or services or both."

Brief Facts of the Case:
The applicant, a manufacturer of machineries and industrial boilers, intends to supply plant and machineries to a recipient eligible for a 90% subsidy from the Central and State Governments. The recipient insists that the supplier charge GST on the total invoice amount minus the subsidy, in line with Section 2(31) and Section 15(2)(e) of the CGST Act.

Findings and Discussion:
- Section 2(31) of the CGST Act: Defines 'consideration' and explicitly excludes any subsidy given by the Central or State Government from being considered as part of the consideration.
- Section 15(2)(e) of the CGST Act: Stipulates that the value of supply shall include subsidies directly linked to the price, excluding those provided by the Central or State Governments.

The applicant contends that the subsidy amount (90% of the total cost) should be excluded from the value of supply as per the aforementioned sections. However, the authority finds that:
1. The contract for supply is between the applicant and the recipient, and the full contract price is recoverable from the recipient regardless of the subsidy.
2. Subsidies provided in the escrow account are part of the price payable by the recipient and are not separately recoverable by the applicant.
3. The subsidy does not affect the price of supply, thus the exclusion provided in Section 15(2)(e) is not applicable.

Ruling:
The subsidy received from the Central/State Government cannot be excluded from the value of supply as it does not affect the price of supply.