TMI Blog2020 (4) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... related persons and the price is payable by the farmer irrespective of the fact that he receives assistance from the government department or not or whether the Bank makes the payment or not. The consideration of the contract is not fixed taking into the account the amount receivable by the farmer as financial assistance and the entire amount is invoiced. Hence price is the sole consideration for supply and the entire invoice value would be the transaction price. Subsidy - HELD THAT:- the amount receivable or received from the Government is received by the farmer and this amount may be received by him directly in option 1 or by the Bank in case of option 2 or by the applicant in option 3 - the method of receipt of payment has no bearing on the price of the supply and also the receipt of payment by the applicant from the Bank or the Government Department (on the authorization of the farmer concerned) is on the account of the farmer only. Hence the price is independent of the assistance amount and hence would not be covered under clause (e) of sub-section (2) of section 15 of the CGST Act. - KAR ADRG 16/2020 - - - Dated:- 23-3-2020 - DR. RAVI PRASAD M.P. AND SRI. MASHHOOD UR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by a farmer, the disbursement of the same is made to the supplier post supply of micro-irrigation system and post receipt of consent from the farmers for release of subsidy amount to supplier on farmer s behalf. Thus, payment towards the price of micro-irrigation system is partially received from farmers and partly the same is received from the Government departments on behalf of the farmers, as in terms of PMKSY or other schemes, Governments have granted subsidy to farmers and it is only for ease of administration, payment of subsidy are disbursed to suppliers of micro-irrigation system. c. The applicant states that hitherto, the supplier is to raise invoice for the full value of micro-irrigation system sold to the farmer and charge 6% CGST and 6% SGST on the price charged in the invoice. This method is well accepted by the Horticulture / Agriculture Department of the State of Karnataka as well as Horticulture / Agriculture Department of other States. d. The Applicant states that the Agriculture Department of Karnataka vide Circular No. GST/2018-19/2019-20 dated 08.11.2019 has given direction to the effect that no GST to be charged on the subsidy portion. Apparently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process of the sanction and receipt of payments are as under: i. The eligible farmers applies to the Government Department for the sanction of financial assistance under a scheme and the applicant has no role to play in the said transaction. The Department concerned would conduct a verification of the eligibility of the farmer for financial assistance and the applicant has no role to play even in this process. ii. Once approved, the farmer approaches the applicant (vendor of the materials) and obtains a quotation. In this issue, the list of vendors are shortlisted by the Government Department and the farmer is free to approach any of the enlisted vendors. The vendor of materials would provide a quotation in the name of the concerned farmer and here also the applicant has nothing to do with the Department. iii. The farmer then submits the quotation issued by the vendor to the Department and there are three options available for the farmer to be exercised: 1. Option 1: The farmer can use his own financial resources and gets the work executed. The farmer purchases the materials from the vendors and makes payment for the supplies received and submits the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices the full value of the commodities to the farmer and the privity of contract is only between the farmer and the vendor applicant. b. Hence the learned representative stated in all the three options supra, the contract is for supply of goods and /or services between the farmer and the applicant vendor and the value of the supply is the entire invoice value. The financial assistance received by the farmer has no bearing on the price of the contract and the farmer is liable to pay the consideration irrespective of the receipt of financial assistance or not. The consideration received by the applicant may be from himself as in option 1 above or from the Bank on account of the farmer as in option 2 or from the Government Department as in option 3 and the way the consideration is received has no bearing on the price of the contract. Further he stated that Bank or the Government Department is only making the payment for the supply made by him to the farmer on the account of farmer only and not directly in their account with the vendor. He stated that there is no privity of contract between the Banker and the applicant or between the Government and the applicant and hence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra are received on account of the farmer only and there is no privity of contract between the applicant and Bank or Government Department. In case of option 1, the farmer himself makes the payment of consideration to the applicant and the contract ends here. The receipt of any amount received by the farmer from the Government Department has no bearing on the price or value of the supply of goods and/or services by the applicant. The Bank or Government Department makes payment to the applicant only on behalf of the farmer. 6.5 As per sub-section (1) of section 15, it is very clear that the value of supply is the transaction value and the transaction value is defined as the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient are not related and the price is the sole consideration for the supply . In the pertinent case, it is clearly evident that the applicant and the farmer are not related persons and the price is payable by the farmer irrespective of the fact that he receives assistance from the government department or not or whether the Bank makes the payment or not. The consideration of the contract is not fix ..... X X X X Extracts X X X X X X X X Extracts X X X X
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