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2023 (7) TMI 248 - AAR - GSTValuation of supply of services - composite supply - rate of tax - providing services of crushing wheat provided by the State Government into fortified atta which in turn is supplied by the State Government through Public Distribution System - components to be included in calculation of the % of value of goods in the total value of composite supply for the purpose of Notification No. 2/2018- Central Tax (Rate). Whether the instant supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended vide Notification No. 2/2018- Central Tax (Rate) dated 25.01.2018) or the same shall be taxable @ 5% as clarified in para 3.2 of the Circular No. 153/09/2021-GST dated 17.06.2021 issued by the CBIC? HELD THAT - The activities undertaken by them 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 Whole meal 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/whole meal 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 - 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 contract entered into with the State Government stipulates that the applicant will retain 1kg refraction and 4kgs bran for conversion of 100 kgs of wheat. As per the contract these bran and refraction are retained by the applicant and it is sold in the open market at the prevailing market rates which is generally around Rs 20/- per kg for bran and Re 1/- per kg for refraction. This rate was also confirmed in the memo issued by State Government of West Bengal Department of Food and Supplies vide memo no. 569(3) - FS/Sectt/Food/4P02/2016/2021 dated 18.02.2022 - in the instant case value of supply shall be the consideration in money and shall also include all the components towards non-cash consideration - 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. 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.
Issues Involved:
1. Value of supply of services provided by the applicant to the State Government. 2. Rate of tax applicable on the value of supply and components to be included in the calculation of the percentage of the value of goods in the total value of composite supply for the purpose of Notification No. 2/2018-Central Tax (Rate). Comprehensive Details of the Judgment: 1. Value of Supply of Services: The applicant, a flour miller, converts wheat provided by the State Government into fortified atta, retaining ownership with the State Government. The value of supply includes both cash and non-cash considerations. The cash consideration is Rs 136.48 per quintal after deducting Rs 43 for gunny bags. Non-cash considerations include gunny bags, bran, and refraction, valued at Rs 124. The total value of supply is Rs 260.48, with the value of goods (packing material and vitamins) being Rs 60, which constitutes 23.03% of the total value of supply. 2. Rate of Tax and Components for Calculation: The supply qualifies as a composite supply of services, primarily milling, with the fortification process being integral to the service. The value of goods involved does not exceed 25% of the total value of the composite supply. Therefore, the supply is exempt from GST under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 2/2018-Central Tax (Rate) dated 25.01.2018. 3. Analysis of Composite Supply: The supply involves milling wheat into fortified atta, packing it in poly-pouches, and delivering it to distributors. This qualifies as a composite supply under clause (30) of section 2 of the GST Act, with milling being the principal supply. The supply is made in relation to functions entrusted to a Panchayat under article 243G of the Constitution, specifically public distribution. 4. Determination of Value of Supply: The value of supply includes cash consideration (Rs 136.48) and non-cash consideration (Rs 124), totaling Rs 260.48. The value of goods (packing material and vitamins) is Rs 60, which is 23.03% of the total value, thus qualifying for exemption. 5. Ruling: The composite supply of services by milling food grains into flour for the State Government for distribution under the Public Distribution System is exempt from GST as the value of goods involved does not exceed 25% of the total value of supply. Conclusion: The Authority for Advance Ruling, West Bengal, ruled that the value of supply includes both cash and non-cash considerations, and the composite supply of milling services is exempt from GST under the specified notification, as the value of goods involved is less than 25% of the total value of supply.
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