What was asked in the Rashmi Hospitality AAR?

Whether the subsidy paid by the Karnataka Government forms part of consideration under Section 2(31) of the CGST Act for catering at Indira Canteens.

How did the AAR define subsidy here?

In the ordinary commercial sense—financial support by government to promote public good, not a customer’s payment for supplies.

Is subsidy included in consideration for GST?

No. The Karnataka AAR held such subsidy does not form part of consideration u/s 2(31) in this context.

Would tax treatment change if subsidy came from the recipient?

If money flows from the recipient as price for supply, that is consideration. A distinct public subsidy from government is different.

What is the quick exam takeaway?

Government subsidy for public welfare catering ≠ consideration; value excludes subsidy; apply Section 2(31) carefully.

Re: M/s Rashmi Hospitality Services Ltd (2019, Karnataka AAR)

```

Quick Summary

The company provided catering at Indira Canteens for the Karnataka Government. It received a government subsidy. The AAR asked: is that subsidy part of consideration under Section 2(31) of the CGST Act? Answer: No. A subsidy is government support for public good, not a buyer’s payment for the service.

Issues

Does state subsidy form part of consideration under Section 2(31) CGST?

Rules

“Consideration” is what the recipient or another person pays for the supply.
Subsidy (in common commercial sense) is government financial help for public good; it is not the customer’s price.
Therefore, such subsidy is excluded from consideration in this context.

CGST Act, 2017 — §2(31)

Facts (Timeline)

Timeline of Rashmi Hospitality AAR facts

Supplier: M/s Rashmi Hospitality Services Ltd — catering services provider.

Contract: With Govt. of Karnataka to run Indira Canteen food services.

Subsidy: Government paid subsidy to support low-cost meals for public.

Question to AAR: Is the subsidy part of consideration u/s 2(31)?

AAR Ruling: Subsidy is not consideration in this setting.

Arguments

Applicant (Supplier)

Subsidy is public support, not price from consumers.
Service would be provided to meet welfare goals regardless of subsidy quantum.
Hence, subsidy should not be added to value as consideration.

Possible Revenue View

Money came because of the supply; include it.
Value should reflect all linked payments.
But the nature and source must be examined.

Ruling (AAR)

Decision graphic for Rashmi Hospitality AAR

The Karnataka AAR held that the government subsidy is not part of consideration under Section 2(31) CGST in this case. Subsidy is financial assistance for public good, not a customer’s payment for the supply.

Ratio (Core Principle)

If money flows from the government to support public welfare, and not from (or on behalf of) the recipient as the price of the supply, it is not consideration under §2(31) CGST.

Why It Matters

Clarifies GST value in welfare contracts (canteens, PDS, social schemes).
Prevents overvaluation where subsidy only supports affordability.
Exam-ready application of “consideration” vs “subsidy”.

Key Takeaways

Subsidy from government for public good ≠ consideration.
Look at who pays and why they pay.
Value for GST excludes such subsidy in this context.

Mnemonic + 3-Step Hook

Mnemonic: “SUB ≠ PRICE”

SUBsidy is public support.
≠ Not paid by customer as price.
PRICE (consideration) is what the recipient (or someone on their behalf) pays for the supply.

IRAC Outline

Issue: Should the Karnataka Government subsidy be included in “consideration” under §2(31) CGST?

Rule: Consideration is payment for the supply by recipient/other person. Subsidy for public good is not such payment.

Application: Subsidy aided affordable meals; it wasn’t a customer’s price. Supply would exist for welfare even if subsidy varied.

Conclusion: Subsidy not part of consideration; exclude it from value.

Glossary

Consideration (§2(31)): What the recipient or another person pays in respect of the supply (price/value).
Subsidy: Government financial support for public purposes; not price from the consumer.
AAR: Authority for Advance Ruling—gives binding rulings to applicants on GST questions.