Summary of case:
The applicant supplies solar photovoltaic panels and Solar EPC services. The applicant is empanelled as channel partner to execute the solar rooftop system in Gujarat under the Surya Gujarat Yojna. The applicant has submitted that as per the scheme, beneficiaries could avail benefits of 40% subsidy of solar system cost for systems upto 3KW and 20% subsidy of solar system cost for systems from 3KW-10KW; that the beneficiaries have to pay the channel partner the amount after deducting the subsidy portion from the total system cost and after successful installation of the solar system, the channel partner has to apply to the respective electricity distribution company(DISCOM) of the region for subsidy and the funds are released by the respective DISCOM directly to channel partners.
The applicant has sought an advance ruling in respect of the following questions:
1. Whether subsidy amount is to be reduced for arriving at the taxable value of the solar system from the system price declared by the Nodal agency? And the GST liability shall be on the taxable value calculated after subtracting the subsidy amount from the system price?
2. What will be the implication of sub-section (2) of Section 17 if the taxable value is derived after subtracting the subsidy amount from system price?
As per Section 15(2)(e) of CGST Act 2017 the subsidy portion provided by the Government shall not be included in the value of the supply to arrive at the taxable value.
The applicant was not able to produce evidence that the subsidy was given/borne by the Government. Therefore, the assistance of Gujarat Urja Vikas Nigam ltd (an authorised nodal agency for implementation of the scheme), was taken. Gujarat Urja Vikas Nigam Ltd vide its letter dated 22-7-2021 submitted that the subsidy given by DISCOMs to empanelled Agencies/Vendors to execute Solar Rooftop PV systems in the residential premises of consumers under the ‘Surya Gujarat’ scheme is actually given by State Government/ Central Government and that the DISCOM is only a facilitator between the Government and supplier (empanelled partner) of solar rooftop PV systems in disbursing the subsidy.
As per Article 265 of the Constitution of India “no tax shall be levied or collected except by the authority of law”. The provisions of Section 76(1) of CGST Act is as follows:
Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not.’
The applicant has collected Subsidy from the Government in this regard and this subsidy amount is inclusive of GST. Hence the applicant is required by law to pay to the Government the said amount in the subsidy representing GST, irrespective of the position of law that subsidy portion is to be deducted from the value of supply charged to the customer, for arriving at the taxable value.
Further it was observed that the provisions of Section 17(2) CGST are attracted when the applicant is effecting taxable supplies and exempt supplies. The subject supply of the applicant is a taxable supply and for the reason that taxable value for charging GST is arrived after subtracting subsidy, does not alter the nature of taxable supply. It remains taxable supply. Therefore there is no implication of section 17(2) of CGST Act 2017.
CRUX: 1. The taxable value on tax invoice issued to the customer shall be arrived after deducting the subject subsidy from ‘System Cost’ and GST liability is on the Taxable Value.
2. There shall be no implication of Section 17(2) CGST Act, if taxable value is arrived after subtracting the subsidy amount from the system price.