Subsidy

Department filed Reference Application against order passed by Appellate Tribunal Inland Revenue (Tribunal) in favour of DISCOs

Validity

Explanation added in sub-clause (i) of Clause (46) of S. 2 of the Sales Tax Act, 1990 (Explanation-in-question) contemplated an unequivocal clarification that the subsidy was not chargeable to the tax under Sales Tax Act, 1990, (the Act, 1990) in case of DISCOs

Explanation-in-question stated that "It is clarified that the value of supply does not include the amount of subsidy provided by the federal government or provincial governments to the electricity consumers and has never been chargeable to tax under the Act"

Pertinently, the explanation-in-question was inserted through the Finance Act, 2022, after the passing of order(s) by the Tribunal, and the matter was decided against Department by the Tribunal while observing that there was no clarification in the law regarding the identity of the obligator

Notwithstanding subsequent introduction of the explanation-in-question, scope and applicability of the explanation was clear

Thus, the proposed questions were decided in favour of the respondents and against the applicant-department

Reference applications were dismissed.

Provision of subsidy was not a vested right and the government enjoyed power to withdraw the same if already provided to the citizens.