The Gujarat Appellate Authority of Advance Ruling (AAAR) ruled that incentives obtained under the “Atma Nirbhar Gujarat Sahay Yojna” dated May 16, 2020, declared by the Gujarat Government can not be regarded as subsidies, and GST is subjected to be charged.
The panel consisting of B V Siva Naga Kumari and Sameer Vakil has affirmed the AAR’s decision, confirming that the appellant, Rajkot Nagarik Sahakari Bank Ltd., isn’t entitled to consider the received incentive as a subsidy exempt from GST. The ruling specifies that the incentive falls within Section 7(1)(a) of the CGST Act and doesn’t qualify for exclusion under Section 15(2)(e) of the same Act.
Rajkot Nagarik Sahakari Bank Ltd. is a registered entity under the GST Department. Under the “Atma Nirbhar Gujarat Sahay Yojna” announced by the State Government, this bank, among others, was mandated to provide unsecured loans up to Rs. 1 lakh to small traders, middle-class businessmen, individual artisans, and the working class, charging an 8% interest. Of this, 2% interest was to be paid by the borrower, while the remaining 6% was to be covered by the Gujarat State Government.
Depending on the quantum of loans disbursed by these banks under the scheme, they were eligible for a one-time incentive from the state government, separate from the 6% interest support provided.
The appellant sought a ruling on whether the incentives received from the “Atma Nirbhar Gujarat Sahay Yojna” issued by the Gujarat Government on May 16, 2020, could be categorized as a subsidy exempt from taxation.
The AAR concluded that the received incentive is subject to GST. It was determined that this incentive does not qualify as a subsidy and therefore does not fall under the exclusion provided in Section 15(2)(e) of the CGST Act. Instead, the supply in question aligns with Section 7(1)(a) of the CGST Act rather than Section 7(2) of the same Act.
From the AAR ruling the petitioner was dissatisfied
The person appealing argued that the subsidy, received as an incentive, doesn’t fall under the consideration as outlined in Section 2(31). According to the clear definition of consideration, any subsidy from the central or state government isn’t part of it.
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Hence, the subsidy in the form of an incentive received by the petitioners shouldn’t be taxable. Moreover, this incentive subsidy is separate from the scope of supply per Section 7(2). Even as per Schedule III of the CGST Act of 2017, the petitioners’ payment received as an incentive wouldn’t be subject to GST.
While upholding the ruling of AAR, the AAAR noted that the petitioner does not elaborate on how incentives shall counted within the provision of section 7(2) or schedule III.
| Appellant Name | M/s. Rajkot Nagarik Sahakari Bank Ltd |
| Case No | GUJ/GAAAR/APPEAL/2023/07 |
| Date | 07.12.2023 |
| Present for the Appellant | Shri Paresh Sheth, Advocate |
| Gujarat AAAR | Read Order |
