Hitze Boilers (P.) Ltd. {AUTHORITY FOR ADVANCE RULINGS} :
Date of Order : 15-09-2023
In the case of Hitze Boilers (P.) Ltd., the issue before the Authority for Advance Rulings (AAR) in Karnataka revolved around whether a subsidy provided by the government should be excluded from the taxable value for calculating GST liability. Hitze Boilers had received a subsidy from the government, where 90% of the price of the goods was deposited in an escrow account by the government, and the remaining 10% was deposited by the recipient. The subsidy amount was subsequently used to pay the supplier.
Key Points of the Case:
- Subsidy and GST Liability: The AAR considered Section 15 of the Central Goods and Services Tax Act, 2017, which deals with the valuation of taxable supply. According to this section, subsidies should be excluded from the taxable value if they are provided in a manner that affects the price of the supply.
- Factual Determination: In this case, the AAR noted that the subsidy did not affect the price of the supply. The supplier had raised an invoice for the full contract price, which was recoverable from the recipient regardless of whether the subsidy was received or not.
- Legal Interpretation: The ruling clarified that subsidies must only be excluded from the taxable value if they are directly linked to the price of the goods or services supplied. Since the subsidy in question did not influence the contract price charged by the supplier, it was deemed not to affect the value of the supply for GST purposes.
- Impact: This decision underscores the importance of correctly interpreting how subsidies impact the taxable value under GST. It emphasizes that subsidies provided by the government should not automatically be excluded from the value of supply unless they demonstrably affect the price charged. Businesses receiving subsidies must therefore assess whether the subsidy directly influences the price of their supplies to determine its impact on GST liability.
In conclusion, the AAR’s ruling in Hitze Boilers (P.) Ltd. provides clarity on the treatment of subsidies under GST law. It highlights that subsidies which do not alter the price of supplies should be included in the taxable value for calculating GST. This interpretation ensures consistency in tax assessment and compliance, aligning with the statutory provisions aimed at fair and accurate valuation of taxable supplies under GST.
