Page 206 - GSTL_21st May 2020_Vol 36_Part 3

452 GST LAW TIMES [ Vol. 36
3. The applicant furnishes some facts relevant to the stated activity :
(a) The applicant states that he is in the business of manufacturing and
supplying of LLDPE pipes and micro irrigation system and its ac-
cessories.
(b) The applicant states that under PMKSY, Karnataka Government
Departments such as Horticulture/Agriculture/Sericulture De-
partments are sanctioning 90% subsidy to eligible farmers who in-
stall micro irrigation system in their farm land. As a matter of poli-
cy, while the subsidy is calculated on the basis of the extent of farm
land brought under micro irrigation by a farmer, the disbursement
of the same is made to the supplier post supply of micro-irrigation
system and post receipt of consent from the farmers for release of
subsidy amount to supplier on farmer’s behalf. Thus, payment to-
wards the price of micro-irrigation system is partially received from
farmers and partly the same is received from the Government de-
partments on behalf of the farmers, as in terms of PMKSY or other
schemes, Governments have granted subsidy to farmers and it is
only for ease of administration, payment of subsidy are disbursed to
suppliers of micro-irrigation system.
(c) The applicant states that hitherto, the supplier is to raise invoice for
the full value of micro-irrigation system sold to the farmer and
charge 6% CGST and 6% SGST on the price charged in the invoice.
This method is well accepted by the Horticulture/Agriculture De-
partment of the State of Karnataka as well as Horticul-
ture/Agriculture Department of other States.
(d) The Applicant states that the Agriculture Department of Karnataka
vide Circular No. GST/2018-19/2019-20, dated 8-11-2019 has given
direction to the effect that no GST to be charged on the subsidy por-
tion. Apparently, the Circular has made reference to Section 15(2)(e)
of CGST Act.
4. Regarding the applicant’s interpretation of law and/or facts, the ap-
plicant states as under :
(a) he is of the view that GST is payable on the price paid or payable by
the farmers to micro-irrigation company and the subsidy which is
granted to the farmer and used by farmers to discharge its payment
obligation to the supplier (by way of giving consent to the Govern-
ment Department to make payment of the same to the supplier)
shall not be considered as subsidy in the hands of the supplier.
Hence, he states that the amount so reimbursed is not covered un-
der Section 15(2)(e) and should be included in the value of supply
and both CGST and SGST is to be charged at the applicable rates.
(b) he is of the view that provisions of Section 15(2) is not invocable in
the instant scenario as the subsidy is not influencing the price
charged by the supplier from its customers and hence it cannot be
said to be a subsidy linked to price.
(c) he is of the view that in terms of PMKSY or other schemes, the sub-
sidy is granted to farmers depending on certain criteria such as
maximum ceiling land for which subsidy is available per farmer,
lock-in period between two subsidy claims by a farmer, etc. and that
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