2024 (7) TMI 1236 - AAR - GST

Supply or not - grant from the Food and Agriculture Organisation of UN - whether the receipt of the said grant is eligible to classify under the Export of Service as Zero rated supply under Section 16 of the Integrated Goods and Services Tax Act, 2017 or not? - liability to pay GST under IGST or under CGST and TNGST for the receipt of grant from the FAO of UN and what rate - eligibility to claim a refund of GST paid on grant provided to applicant in India under Section 55 of the CGST Act, 2017. Whether the grant from the Food and Agriculture Organisation of UN is a supply or not in accordance with the provisions of the GST Act? - HELD THAT - In the instant case, the applicant has submitted that in the transaction between the applicant and the FAO of UN, nothing will be supplied to the FAO of UN for the grant given by them. It is purely a gratuitous grant from the overseas UN linked autonomous and Non-Profit Organisation for the use of the applicant to overcome the obstacles suffered in difficult situation and mainly concentrates on the indirect welfare of the people who depends on the applicant Company - That the grant sanctioned by the FAO of UN is a gratuitous grant under the projects of the said UN organization and it has to be utilised according to the budget lines specified in the agreement within the time lines specified. The said budget lines were determined based on the proposal submitted by the applicant Company to the FAO of UN. From the perusal of the provisions of the CGST Act, 2017 regarding Scope of Supply and the submissions made by the applicant regarding the activities to be undertaken by the applicant as mandated by the grant providing organization we find that there is no supply of Goods or services to the grant providing organization, and hence the we are of the opinion that the activities undertaken by the applicant in lieu of receipt of the Grant from FAO is not covered under the meaning of 'scope of supply'. On perusal of the description of the investment as mentioned in the Grant Agreement it is found that the purpose of the investment is .to help the applicant company overcome the losses due to lack of capital, slowing down and stopping of cash flows and collapsing of the distribution network due to the pandemic lockdown and the activities to be undertaken by the applicant are towards strengthening the local green enterprise for sustained livelihood of vulnerable communities, and contribute to positive environmental outcomes, using an inclusive approach that focuses on enhancing the capacities of women in forest-based enterprises as envisioned by FAO - neither the grant received by the applicant can be construed to be consideration under the provisions of the GST law nor the activities to be undertaken by the applicant, as per the work plan developed and agreed upon jointly by the FAO and the applicant qualify to be supply under the provisions of GST law. Since the answer to above question raised by the applicant is answered in the affirmative, the other questions, need not be answered as they cease to exist. Eligibility for refund of GST paid on the grant by FAO of UN under Section 55 of CGST Act - HELD THAT - On perusal of the provisions of Section 95 (a) and Section 103 (a) of the CGST Act, 2017, it is opined that this question is also out of purview of Section 97 of the CGST Act, 2017.

Summary

Issues Involved:
1. Whether the grant from the Food and Agriculture Organisation of UN is a supply under GST provisions.
2. Classification of the grant as "Export of Services" and "Zero-rated supply" under IGST Act.
3. GST liability on the grant under IGST, CGST, and TNGST.
4. Eligibility for refund of GST paid on the grant by FAO of UN under Section 55 of CGST Act.

Issue-wise Detailed Analysis:

1. Whether the grant from the Food and Agriculture Organisation of UN is a supply under GST provisions:
The applicant, a private limited company engaged in social business enterprise, received a grant of USD 24,893 from FAO of UN to overcome financial obstacles due to the pandemic. The grant was intended to support the applicant's business activities without any supply of goods or services to FAO of UN. As per Section 7 of the CGST Act, 2017, "supply" includes all forms of supply of goods or services made for a consideration in the course or furtherance of business. The applicant argued that the grant does not constitute a "supply" since there is no exchange of consideration or supply of goods/services to FAO of UN. The authority agreed, stating that the grant is a gratuitous one and does not fall under the scope of "supply" as defined under GST law.

2. Classification of the grant as "Export of Services" and "Zero-rated supply" under IGST Act:
Since the grant does not qualify as a supply under GST provisions, the question of classifying it as "Export of Services" or "Zero-rated supply" under Section 16 of the IGST Act, 2017, does not arise. The authority did not address this issue further as it became irrelevant.

3. GST liability on the grant under IGST, CGST, and TNGST:
Given that the grant is not considered a supply, the applicant is not liable to pay GST under IGST, CGST, or TNGST for the receipt of the grant from FAO of UN. The authority did not need to determine the applicable GST rate or head under which GST would be payable.

4. Eligibility for refund of GST paid on the grant by FAO of UN under Section 55 of CGST Act:
The question of whether FAO of UN is eligible to claim a refund of GST paid on the grant does not arise since the grant itself is not considered a taxable supply. Additionally, the authority noted that this question is outside the purview of Section 97 of the CGST Act, 2017, and thus did not provide a ruling on this matter.

Ruling:
1. The grant from the Food and Agriculture Organisation of UN is not a supply in accordance with the provisions of the GST Act.
2. Questions 2 and 3 are not answered as they cease to exist due to the ruling on Question 1.
3. Question 4 is not answered as it is outside the purview of Section 97 of the CGST Act, 2017.