GST leviable on incentives given by Govt. to banks under Sahay Yojana scheme being not subsidy: AAR

Case Details: Authority for Advance Rulings, Gujarat Rajkot Nagarik Sahakari Bank Ltd., In re - [2021] 131 taxmann.com 247 (AAR - GUJARAT)

Judiciary and Counsel Details

• • Sanjay Saxena and Arun Richard, Member
  • Paresh Sheth, Adv. for the Applicant.

Facts of The Case

The applicant was a multi state Schedule Co-operative bank. The State Government announced “Atma Nirbhar Gujarat Sahay Yojna” to provide loans without securities up to Rs. 1 lacs to customers charging 8% interest. Based on the performance of banks, they would be allowed one time incentive between 2% to 4% depending on the total lendings done by the Banks under the said sahay yojna. The applicant filed an application for advance ruling to determine taxability of incentive received.

AAR Held

The Authority for Advance Ruling observed that incentive specifically provided to the applicant is for motivation and encouragement for the applicant to undertake this specific scheme. The business performance of loan disbursement is the sole criteria for receiving subject incentive. In GST law, there is no special treatment to be given to incentives given by Government. Therefore, the incentive given by Government would be a consideration for applicant, as incentive amount received by applicant would be for performing and achieving success for said scheme and incentive amount would not be passed on to customers who would be getting loans. Thus, the incentive amount received would be liable to GST.

Case Review

• • CIT v. Ponni Sugars & Chemicals Ltd. [2008]174 Taxman 87/306 ITR 392 (SC) (para 19)
  • Rashmi Hospitality Services (P.) Ltd., In re [2019] 110 taxmann.com 352/[2020] 79 GST 359 (AAR – Kar.) (para 22) distinguished.

List of Cases Referred to

• • Rashmi Hospitality Services (P.) Ltd., In re [2019] 110 taxmann.com 352/[2020] 79 GST 359 (AAR – Kar.) (para 22) distinguished.
  • CIT v. Ponni Sugars & Chemicals Ltd. [2008]174 Taxman 87/306 ITR 392 (SC) (para 19)