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2023 (7) TMI 185 - AAR - GSTExemption from GST - composite supply of service by way of milling of food grains into flour to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - rate of GST on such milling, if not exempt - Valuation - inclusion of non-cash consideration - HELD THAT - The applicant, according to the agreement as produced, has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid and Vitamin to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly labeled poly-packs having thickness of 40 microns or above. It, therefore, appears that the activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT - The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - reference made to Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT - The value of supply for providing milling services to convert 100 kgs of wheat supplied by the State Government into 95 kg of fortified atta, according to the applicant, comes at Rs. 136.48 Rs. 124.00 Cost of 02 gunny bags Rs. 43/- Receipt from sale of bran and refractors Rs. 81/- Rs. 260.48. We find that the value of goods involved in the instant supply stands at Rs. 60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply. Thus, the instant supply of services by way of milling of food grains into flour (atta) to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the supply satisfies all the conditions specified in the said entry. As a result, we are unable to accept the views expressed by the officer concerned from the revenue.
Issues Involved:
1. Eligibility for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) for the composite supply of milling food grains into flour. 2. Applicable rate of GST if the exemption is not applicable. Summary: Issue 1: Eligibility for Exemption under Entry No. 3A of Notification No. 12/2017-Central Tax (Rate) The applicant, engaged in milling food grains into flour for the Food & Supplies Department, Govt. of West Bengal, sought a ruling on whether this service is exempt under entry No. 3A of Notification No. 12/2017-Central Tax (Rate). The Authority examined whether the supply qualifies as a composite supply of goods and services, if it relates to functions entrusted to a Panchayat or Municipality under the Constitution, and if the value of goods in the composite supply is not more than 25% of the total value. The Authority confirmed that: - The supply qualifies as a composite supply under Section 2(30) of the GST Act, where milling is the principal supply. - The supply is related to functions entrusted to Panchayats under Article 243G of the Constitution, specifically public distribution. - The value of goods (fortification and packing charges) constitutes 23.03% of the total value of the composite supply, which is less than the 25% threshold. Thus, the composite supply of milling food grains into flour for the PDS is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate). Issue 2: Applicable GST Rate if Exemption is Not Applicable If the value of goods in the composite supply exceeds 25%, the supply will attract a GST rate of 5% (CGST @ 2.5% + WBGST @ 2.5%) under entry No. 26 of Notification No. 11/2017-Central Tax (Rate). Ruling: 1. The composite supply of milling food grains into flour for the PDS is exempt under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) as the value of goods does not exceed 25% of the total value. 2. If the value of goods exceeds 25%, the supply will attract a GST rate of 5%. This ruling is subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.
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