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2023 (12) TMI 820 - AAAR - GSTLevy of GST - incentives received under Atma Nirbhar Gujarat Sahay Yojna dated 16.05.2020 declared by the Gujarat Government could be considered as subsidy or not - incentive received under said scheme could be considered as supply of service under the provisions of section 7 under CGST Act - incentive received under said scheme if considered as supply then would it be covered under section 7(2) of CGST Act - incentive received under said scheme could be considered as excluded from the value of taxable supply under section 15(2)(e) of CGST Act, 2017. HELD THAT - It is found that the Banks were provided a base percentage of loan disbursement amount as an incentive. The incentive so granted varied, meaning thereby that the percentage of incentive increased on higher disbursement of loan. At best, the incentive can be termed as a consideration to the Cooperative Banks for providing the service to the beneficiaries/loanees by extending loans under the scheme promoted by the State Government of Gujarat. The argument of the appellant therefore that they had provided services only to the person who had availed loan and not to the State Government, fails - the reliance of the appellant on various dictionary meaning to argue that both the words subsidy and incentive, mean the same, is not a plausible contention. Scope of supply u/s 7(2), ibid - Subsidy in the form of an incentive received - HELD THAT - The appellant has not explained how incentive would fall within the ambit of section 7(2) or Schedule III. 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' - HELD THAT - 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. This incentive granted based on the performance cannot be termed as a subsidy. Even otherwise, incentive granted to Cooperative that the GAAR has clearly held that this Banks/Cooperative Credit Societies granted no benefit to the loanees. This was one of the ground adopted by the GAAR to hold that the incentive was not a subsidy. We are in complete agreement with this finding of the GAAR. Scope of Actionable claim - incentive is a subsidy or not - HELD THAT - Actionable claim is an intangible movable property, and its transfer is dealt with in Chapter VIII of the Act, ibid. Accordingly, actionable claim means a claim to an unsecured debt and b beneficial interest in a movable property - one time incentive earned proportionate to the total disbursements of loans, would not fall within the ambit of actionable claims so as to fall within the exclusion as per Sr. No. 6 of Schedule-Ill, which deals with the activities of transactions which are neither supply of goods nor a supply of services. Incentive paid by Government under the said scheme could also be considered as the compensation towards the interest or not - HELD THAT - Since it is not substantiated with facts as to what exactly was the rate charged for other borrowings outside the scheme, what was the rate charged by other Banks during the period under dispute etc., it is difficult to come to a conclusion as far correctness of the submission is concerned. Had that been the case, the incentive given would have been constant/static and would not have varied with the increase in the level of disbursements of loans. Even otherwise, it is found that the loans were advanced during a period when the country was going through pandemic which could have also had its effect on the market borrowings consequently on the rates charged by the Banks. The scheme provided for incentives, meaning rewards, which varied based on performance. The last submission of the appellant is that they have not supplied any goods or services and the amount cannot be considered as consideration hence is not covered u/s 7(1)(a) of CGST Act - HELD THAT - Incentives were directly linked to the service provided by the appellant of granting loans to the beneficiary/loanee under the Scheme. Therefore, the above argument is not a legally tenable argument. Reliance placed on O Rashmi Hospitality Services Pvt. Ltd. 2019 (10) TMI 755 - AUTHORITY FOR ADVANCE RULING, KARNATAKA - HELD THAT - The ruling was sought in respect of the said subsidy. However, it is found that the ruling is not applicable to the present dispute primarily since unlike in this case, there was no incentive paid over and above the amount fixed to M/s. Rashmi. Even otherwise, in terms of Section 103 of the CGST Act, 2017, the aforementioned ruling is applicable only to M/s. Rashmi the applicant and the jurisdictional officer. Reliance placed on O Ponni Sugars and Chemicals Limited 2008 (9) TMI 14 - SUPREME COURT - HELD THAT - The appellant has erred in relying on the aforementioned judgement to substantiate his argument, more so since in the said judgement the two questions of law framed by the Hon'ble Apex Court were as follows - the questions on which the ruling was sought from GAAR at paragraph 7 are different. The reliance therefore, on the aforementioned judgement of the Hon'ble Supreme Court, is legally untenable. The appeal filed by appellant M/s Rajkot Nagrik Sahakari Bank Limited against Advance Ruling Authority for Advance Ruling is rejected.
Issues Involved:
1. Whether the incentives received under "Atma Nirbhar Gujarat Sahay Yojna" could be considered as subsidy and not chargeable to tax. 2. Whether the incentive received under the scheme could be considered as supply of service under section 7 of the CGST Act. 3. Whether the incentive received under the scheme, if considered as supply, would be covered under section 7(2) of the CGST Act. 4. Whether the incentive received under the scheme could be excluded from the value of taxable supply under section 15(2)(e) of the CGST Act, 2017. Summary: 1. Incentives as Subsidy and Taxability: The appellant argued that the incentives received under "Atma Nirbhar Gujarat Sahay Yojna" should be considered as a subsidy and not chargeable to GST. They contended that the subsidy in the form of an incentive is not consideration under Section 2(31) of the CGST Act, as it is given by the State Government. The GAAR ruled that the incentive is liable to GST and does not merit exclusion from valuation under section 15(2)(e) of the CGST Act. The appellate authority upheld this ruling, stating that the terms "subsidy" and "incentive" are used distinctly in the government resolution, indicating different meanings. The incentive is considered a consideration for the services provided by the banks in disbursing loans. 2. Supply of Service under Section 7: The appellant claimed that the incentive should not be considered as a supply of service under section 7(2) of the CGST Act and is not taxable under Schedule III of the Act. The appellate authority found that the incentive is directly linked to the service provided by the banks in granting loans under the scheme and thus falls within the definition of "consideration" under section 2(31) of the CGST Act. The authority also noted that the incentive is not covered under the exclusion provided in section 7(2) or Schedule III. 3. Coverage under Section 7(2): The appellant did not provide a clear explanation of how the incentive would fall within the ambit of section 7(2) or Schedule III. The appellate authority reiterated that the incentive is a consideration for the services provided and does not fall under the exclusions mentioned in section 7(2) or Schedule III. 4. Exclusion from Taxable Supply under Section 15(2)(e): The appellant argued that the incentive should be excluded from the value of taxable supply under section 15(2)(e) of the CGST Act. The appellate authority rejected this argument, stating that the incentive is a consideration for the services provided by the banks and is not a subsidy that can be excluded from the value of taxable supply. Alternative Arguments and Case Laws: The appellant's alternative plea that the incentive could be considered as an "Actionable Claim" was also rejected. The appellate authority clarified that actionable claims are intangible movable properties and the incentive does not fall within this category. The appellant's reliance on the case laws of Rashmi Hospitality Services Pvt. Ltd. and Ponni Sugars and Chemicals Limited was found to be misplaced as the facts and legal questions in those cases were different from the present case. Conclusion: The appeal filed by M/s Rajkot Nagrik Sahakari Bank Limited against the Advance Ruling No. GUJ/GAAR/R/35/2021 was rejected, and the ruling that the incentive received under the "Atma Nirbhar Gujarat Sahay Yojna" is liable to GST was upheld.
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