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TMI Blog2020 (4) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... / Sericulture Department of Government of Karnataka under PMKSY scheme or any other Central / State Government approved schemes but disbursed to the supplier to be treated as "subsidy" in the hands of the supplier and to be excluded while ascertaining the "transaction value"? b) Whether the question of inclusion or exclusion of subsidy amount in the value of taxable supply would arise under Section 15(2) of the CGST Act, when such subsidy is not impacting the transaction value, which is price actually paid or payable for the supply of goods by the customer i.e., farmers and when the subsidy is disbursed by Horticulture / Agriculture / Sericulture Department to the supplier on behalf of recipient of the supply (farmers)? c) Whether supplier would be entitled to refund of input tax credit accumulation, which may arise if subsidy is not treated as part of taxable value? 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that he is in the business of manufacturing and supplying of LLDPE pipes and micro irrigation system and its accessories. b. The applicant states that under PMKSY, Karnataka Government Departments such as Hortic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mers and hence it cannot be said to be a subsidy linked to price. c. he is of the view that in terms of PMKSY or other schemes, the subsidy is granted to farmers depending on certain criteria such as maximum ceiling land for which subsidy is available per farmer, lock-in period between two subsidy claims by a farmer, etc. and that it is only for administrative convenience, the disbursement is made to suppliers of micro-irrigation systems and that also post certification of installation of irrigation system by farmers, post receipt of consent from farmer for disbursement of subsidy entitlement to irrigation system supplier, etc. Therefore, when only for administrative purposes, the subsidy is distributed to the suppliers, it cannot be said that the subsidy is received by the supplier and /or it is linked to price charged by the supplier. d. The applicant questions that in the event, it is decided that GST is to be charged only on the non-subsidy portion, will the supplier be eligible to claim refund of unutilized input tax credit which may arise if subsidy is not treated as part of taxable value and when in their case, rate of tax on various inputs is higher than rate of tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the farmer and the financial assistance provided by the Government Department is directly credited to the loan account of the farmer. Even in this model, there is no privity of contract between the vendor applicant and the Government Department in deciding the price and also not even with the Bank. The contract is only between the farmer and the vendor applicant and whether the farmer receives assistance from the Government or not, the farmer is liable to pay the full consideration to the vendor applicant. The Bank pays the full amount billed by the applicant vendor and the farmer shall be liable to pay the full consideration to the vendor applicant if Bank does not make the payment. Option 3: The farmer pays of the consideration to the applicant vendor and the applicant vendor bills the entire value and the remaining amount is given on credit. The farmer then gives a no-objection certificate to the Department concerned that if the assistance is sanctioned to him, the 90% of the amount, i.e. the entire assistance amount may be paid to the applicant vendor on his account. The Department on sanction of the amount of assistance would make the payment to the applicant vendor on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 15 of the CGST Act, 2017 reads as under: "15. Value of taxable supply.- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include - (a) ......................... (b) ......................... (c) ......................... (d) ......................... (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.- For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy." 6.4 The nature of contract between the farmer and the applicant is verified and found that the applicant is entering into a contract with the farmer alone for the supply of goods and/or services and there is no involvement of the third party in the same. The consideration for the contract is the full value of the goods and / or services and it is the reci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 or by the Bank in case of option 2 or by the applicant in option 3. The farmer has a choice of either opting option I or option 2 or option 3 and choice of any one of the option has no impact on the price of the supply of goods and /or services. Further, the liability of the farmer with the applicant for the supply received by him will get extinguished only when the applicant receives the consideration and it is immaterial from whom he actually receives the amount and the amount received in only credited against the liability of the farmer with him. Hence 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. 7. In view of the foregoing, we pass the following RULING 1. The amount of assistance received by the farmer or on account of the farmer from the Government Department has no bearing on the price and hence on the value of supp ..... 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