TMI Blog2023 (9) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... overable by the Applicant, but are part of the price payable by the recipient. Thus, there does not arise a situation where the subsidies are to be added separately to the transaction value or value of supply payable by the recipient. Also, for the same reason, the subsidy is not affecting the price of supply. Only the subsidies provided by Central Government and State Governments which are directly linked to the price and affects the price of supply are not a part of value of supply. Hence the exclusion provided in Section 15(2)(e) is not applicable in the instant case and the subsidies provided by Central Government and State Governments cannot be excluded in determining the value of supply. The subsidy received from the Central / State Government cannot be excluded from the value of supply as the same is not affecting the price of supply. - DR. M.P. RAVI PRASAD AND SRI. KIRAN REDDY T, MEMBER Represented by : Sri K M Narasimha Murthy, Chartered Accountant and Sri Rahul Rao, Director ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 AND UNDER SECTION 98(4) OF THE KGST ACT, 2017 M/s. Hitze Boilers Private Limited, Plot No 52 and 53, Kunigal Industrial Area, Kallanayakanahalli Villa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dies provided by the Central Government / State Government. They have relied on the decision of AAR Karnataka in the case of M/s. Rashmi Hospitality Services in Advance Ruling No. KAR ADRG 61/2019, dated 20th September 2019. 5.4 This office had addressed a letter to the Principal Commissioner of Central Tax, Bengaluru North West GST Commissionerate on 10-02-2023 to file comments on the application filed. In response to this, the Commissioner of Central Tax, Bengaluru North West GST Commissionerate has furnished comments as below:- 2. In this case, the Central Silk technological Research Institute (CSTRI), Central Silk Board, Bangalore is a Central Government Organisation under the Ministry of Textiles, Government of India have brought out various schemes of post cocoon sector under Central Sector Scheme namely Silk Samagra . Under the said scheme the CSTRI empanelling the competent manufacturers and suppliers from different states of the country at lowest rates in accordance with revised Public Procurement (Preference to Make in India), Order No. P45021/2/2017-PP(BEl 1) of Ministry of Commerce and Industries, GOI dated 04-06-2020. The Central Silk Board invites bids in two bid syst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiated the Silk Samagra scheme for establishing production units in India, the government itself undertake various activities such as empanel the suppliers in India, e-procurement of the machinery procedure, submission of the quotation by the supplier, inviting bids in two bid system, payment of amounts to the supplier, opening of ESCROW account and Letter of credit, giving directions to the bank to release the amount to the supplier. However in this process the beneficiary has no role in the initiation of the scheme till completion of contract documents such as, prescribing the terms and conditions of the tender document and general conditions of the contract, entering into non-disclosure agreement, submission of contract form and manufacturers authorization, biding terms, technical specification etc. Till this stage the transactions are purely between the suppliers empaneled and the central government or state government. In order to ensure that the payment of subsidy reaches the particular suppliers, the Government prescribes the opening of an ESCROW account in a nationalized bank through a letter of credit (LC) and monitor the mode of payment in stages. Here the beneficiary ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; If we carefully peruse the definition of recipient Section 2(93)(a), it is evident that the recipient of supply of goods is the person who is liable to pay that consideration. In this case the government has paid the 90% of the amount and the beneficiary has paid only 10%. Hence the government has to be treated as the recipient of the goods and not the beneficiary in as much as the 90% of the cost is incurred by government. The beneficiary cannot claim expenditure to the extent of 90%. They can claim 10% as expenditure in their books of accounts. The applicant has relied upon two advance rulings. The same is discussed as under:- In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by the Government directly. Under the circumstances, this office is of the opinion that the 90% of the subsidy provided by the Government given to the supplier through ESCROW account is not includable in the value as the said amount is not covered within the meaning of consideration and value and hence not taxable. The remaining 10% of the amount paid by the beneficiary to the supplier is includable in the value for the purpose of calculation of tax. PERSONAL HEARING/PROCEEDINGS HELD ON 21.02.2023 and 13.04.2023 6. Sri Rahul Rao, Director along with Sri K M Narasimha Murthy, Chartered Accountant and Duly Authorised Representative appeared for personal hearing proceedings held on 21.02.2023 and 13.04.2023 and reiterated the facts narrated in their application. FINDINGS DISCUSSION 7. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------- (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. 11. Section 9 of the CGST Act 2017 stipulates that there shall be levied a tax called CGST on all intra-state supplies of goods or services or both, on the value determined under Section 15 and at such rates as notified and the same shall be paid by the taxable person. Thus, the value of a supply has to be arrived at, as per Section 15 of the CGST Act. Further Section 15(1) stipulates that the value of the supply of goods or services or both shall be 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. 12. In the instant case, the supplier and the recipient are not related and the price is the sole consideration for the supply and thus the transaction value becomes the value of supply. The transaction value is the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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