TMI Blog2021 (8) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... specific scheme. By this incentive, the State Government is incentivising the applicant to undertake this scheme and achieve success, for the incentive is not absolute but relative depending on the performance of the applicant. As the incentive is linked to the Amount of Loan disbursed in rupees, we note that the yardstick for incentivising the applicant is based on applicants willingness and performance to achieve targets, which in subject case is the amounts of loan disbursed, the highest incentive being 4% for more than 100 Crore rupees disbursed and the minimum being 2% for upto 10 crore rupees of loan disbursed. The subsidy is granted in public interest, related with welfare of the public or provided to a person/business by Governments, to rationalise the cost impact directly/indirectly on the public. The said incentive has no such bearing on reducing the interest burden of 2% on the customers of the applicant, but incentivising the applicant for its performance of business in said scheme. The issue is not taxability on 6% interest amount given by Government but on the subject incentive amount given over and above the 6% interest amount to the applicant. Further, on read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 4. The applicant has submitted that as per the definition of Consideration , it is crystal clear that the subsidy given either by the Central Govt. or State Govt. would not form a part of consideration and therefore the subsidy in the form of incentive received by them could not be chargeable to tax. 5. The applicant has submitted that the subsidy in the form of incentives received is also not covered under the definition of Scope of supply as defined under the provisions of Section 7(2) of CGST Act. Sub-section 2 of Section 7 is reproduced here under: (2) Notwithstanding anything contained in sub-section (1), (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be out of the purview of GST. 10. The applicant vide their letter dated 13-7-21 has submitted the additional submission wherein they have reiterated most of the points which were raised and submitted during the course of personal hearing. 10.1 The applicant has submitted the interest schedule effective from 5-3-19. From the schedule it can be seen that on loan amount they are charging more than 8% interest and hence it can be concluded that the incentive subsidy has direct nexus with the interest loss to the Bank and hence even assuming for a while that the amount paid is an incentive it is in the nature of compensation of interest and as such interest earned by the Bank, from the government under the said scheme would be exempt from GST. Further, submitted that the payment given by the State Government can also be termed as additional interest on the loan amount sanctioned by the banking and financial institutions and therefore also GST would not be applicable on such amount and hence the amount paid by the Government may please be declared as exempt from the payment of GST. 10.2 The applicant has submitted that since they have opted for the scheme issued by the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide letter F. No. IV/16-20/Tech/2020-21 dated 7-5-21 has submitted as follows: 11.1 Services of extending deposits, loans or advances offered by the banks falls within the SAC code 997113 and consideration received in terms of interest are exempted by Sr. No. 27 of Notification No. 12/2017-CT (Rate) dated 28.06.2017. Therefore no question of GST liability arises on the income (consideration) earned as interest. 11.2 Further, reimbursement of part interest or subvention of such interest by the State Government is a kind of subsidy and therefore by virtue of Section 2(31) of CGST Act, 2017 such subsidy given by the State Govt. is excluded from the purview of the Consideration . As per Section 15(2)(e) of the CGST Act, 2017 such subsidy is also not included in the value of the supply made by the applicant. Personal Hearing 12. Shri Paresh Sheth, Advocate appeared for the Personal hearing through Video conferencing on 17-6-21. Shri Sheth submitted that they have received the incentives 2%/4% on the amount of loan disbursed to the beneficiary. Further, Shri Sheth appeared on 30-6-21 and reiterated the contents of the application. FINDINGS: 13. At the outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 Crores to ₹ 100 Crores --- 3% More than ₹ 100 Crores ---------- 4% 16.2 The applicant has disbursed the loan amount more than ₹ 100 Crores and received 4% incentive amounting to ₹ 9,24,28,936. 17. We find that the applicant Bank has disbursed the loan of ₹ 1 lacs to customers @ 8% interest out of which customer is liable to pay interest @2% and remaining 6% interest amount is borne by the State Government. Further, the applicant received 4% as an incentive on the total loan amount disbursed to the customers, over and above the 6% interest amount paid by the Government. 18. The issue hinges on whether subject incentive amount is taxable. Subject Incentive: 18.1 We refer to applicants reference to Incentive meaning at para 7, that Incentive may be explained as Encouraging or impelling. We agree on this meaning. 18.2 Further as Incentive is not defined in the GST Act, we refer to the dictionary meaning. As per Webster dictionary (https://www.merriam-webster.com/dictionary/incentive) incentive is something that incites or has a tendency to incite to determination or action and as per lexico dictionary meaning (https:// ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in the total income and Whether the assessee was entitled to exemption under Section 80 P(2)(a)(i) of the Income Tax Act, 1961 in respect of interest received from the members of the society. Whereas issue in the present case is whether incentive( 4% on loan disbursed amount) received by the applicant over and above interest amount of the loan ( 6%) , given by the Government is liable to Tax under GST. The facts of the referred case law are different from the subject matter and not a covered case. Further, applying this case law at para 14, 15 and 16, the incentive amount received by the applicant in present case has no accompanying condition on the applicant to use it for easing the burden of the customer. The incentive received in the hands of the applicant is therefore its revenue with no strings attached. 20. The applicant cited their interest schedule and that the applicant is charging more than 8% interest and this incentive is in nature of compensation of interest loss. We have examined the cited Interest Schedule of the Bank effective from 5-3-19 and find the rate of interest marked by the applicant is for the O.D. (Overdrawn) in Current Account and not for the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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