TMI Blog2023 (2) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. It, therefore, appears 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 Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017 - reference made to to Para 3.1 of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - MR. BRAJESH KUMAR SINGH, AND MR. JOYJIT BANIK, MEMBER Applicant s representative heard : Mr. Manish Raj Dhandharia, FCA Preamble A person within the ambit of Section 100 (1) of the Central Goods and Services Tax Act, 2017 or West Bengal Goods and Services Tax Act, 2017 (hereinafter collectively called the GST Act ), if aggrieved by this Ruling, may appeal against it before the West Bengal Appellate Authority for Advance Ruling, constituted under Section 99 of the West B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant, vide written submissions furnished on 21.10.2022 13.01.2023 respectively, states that the Directorate General of GST Intelligence ( DGGI ) initiated an inquiry into the business of the applicant in the month of December, 2020. Summons was issued and the applicant duly honoured the summons. But no show cause notice or demand order was issued by the DGGI till date. Moreover, no specific question with respect to any matter was raised by the DGGI. On being aggrieved by the action initiated by the DGGI, the applicant had filed a writ petition before the Hon ble Calcutta High Court vide W.P.A. 195 of 2021. But the said writ petition was not contested by the applicant and the same has been dismissed by the Hon ble Court vide order dated 18.02.2021. The case status of the writ petition as appearing in the Calcutta High Court portal, is now showing as disposed . Therefore, it can be construed without any doubt that no proceeding is pending in this matter and the instant application is liable to be admitted in terms of the provision of Section 98(2) of the CGST Act, 2017. In this regard, the applicant has relied upon the decision of Hon ble Telangana High Court in the matter of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for Advance Ruling made under sub-section (1) of section 97 shall not be admitted by the Authority where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the GST Act. We have duly considered the submission made by the applicant. We find that the fact of the case of M/s Srico Projects Pvt. Ltd. vs. Telangana State Authority for Advance Ruling, on which the applicant has placed his reliance, is different from the case of the applicant. In the above-referred case, the application for advance ruling was filed on 11.05.2019 and notice was issued by the DGGI on 15.12.2021 i.e., much after the filing of application for advance ruling. The Hon ble Court thus held that the same cannot be a bar under the first proviso to sub-section (2) of section 98 of the CGST Act . In the instant case, the DGGI had initiated inquiry in the month of December, 2020 while the applicant has filed the application in the month of September, 2022. However, the applicant has submitted that no show cause notice or demand order was issued by DGGI and no specific question with respect to any matter were issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butors as nominated by the State Government for distribution to the consumers, immediately after the process of crushing. 2.6 The applicant does not gain ownership of either wheat or atta in the entire process of crushing it. This is substantiated by Clause 10(4) of the contract which states that the applicant shall under no circumstances sell the stock of atta in the open market. The atta is distributed only through PDS. 2.7 During the process of conversion of wheat into atta, two types of wastes are generated, namely bran and refraction. The bran and refraction so generated will subsequently be retained by it and 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 fact was further confirmed by the State Government of West Bengal, Department of Food and Supplies vide memo no. 569(3) - FS/Sectt/Food/4P-02/2016/2021 dated 18.02.2022. 2.8 The applicant will charge crushing charges from the State Government valued at Rs 179.48 per quintal. This rate was last notified by the Government of West Bengal, Food and Supplies Department vide memo no. 2583(3) FS/Sectt/Food/4P-02/2016 dated 07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 11/2017- Central Tax (Rate) dated 28.06.2017). Combined reading of the definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51] makes it clear that a person registered only for the purpose of deduction of tax under section 51 of the CGST Act is also a registered person for the purposes of the said entry No. 26, and thus said supply to such person is also entitled for 5% rate. 2.14 The provisions regarding value of supply are contained in Section 15 of the Act. Sub-section (1) of Section 15 states that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. 2.15 In the given case price is not the sole consideration for the supply and as per the contract the amount of consideration is already furnished in the Table in aforesaid para 2.8. 2.16 In addition to the above, the cost of gunny bags is reduced from the amount of Rs 179.48/- as the State Government considers the retention of gunny bags by the applicant as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Rule 27(b) will be applicable for the instant case. 2.21 The cash consideration is Rs 136.48/- per quintal. The non-monetary considerations include gunny bags, bran and refraction. The value of these non-monetary considerations is known at the time of supply as the net realizable value is ascertainable. 2.22 Value of 2 gunny bags should be included in value of supply on the basis of consideration as defined by the Food and Supplies Department of Government of West Bengal in their Department vide memo no. 2583(3) FS/Sectt/Food/4P-02/2016. 2.23 Value of supply shall include the cash consideration received and net realizable value (i.e., sale value reduced by further processing costs) of non-monetary consideration which include gunny bags, bran and refraction. 2.24 As per Circular No. 153/09/2021- GST dated the 17th June, 2021, if exemption is not available to the flour millers, owing to conversion of wheat into flour not being eligible for exemption by virtue of Notification No. 12/2017 Central Tax (Rate), the rate of tax applicable shall be 5%. 2.25 In order to determine whether exemption is available or not, the following calculation is required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nonmonetary considerations : Bran (4Kg per quintal @ Rs.20/- per kg) 80.00 Refraction (1Kg per quintal @ Rs.1/- per Kg) 01.00 (B) Total non-monetary consideration 81.00 Total consideration (A) + (B) 260.48 2.30.1 It is reiterated that the rate of tax applicable on services provided by the Applicant is 5%, if it does not qualify for exemption granted vide Notification No. 2/2018 Central Tax (Rate), by virtue of Circular No. 153/09/2021 GST dated 17.06.2021. 2.30.2 The component of goods in the said composite supply is packing material only. The value of supply of such packing material is Rs. 50/- per quintal. Such value of the packing material is calculated as per the cost sheet provided by the State Government and not as per actuals. Owing to the continuous nature of the contract, the actual value of the packing material is not determinable at the time when GST is levied. Hence, consideration of the actual cost of packing material would render the application of the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the CBIC. 4.3 The issue, therefore, is required to be analyzed considering the following aspects: (a) whether the supply made by the applicant can be regarded as composite supply of goods and services; (b) if the supply qualifies as composite supply, whether the same is made by way of any activity 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; (c) if the answers of (a) and (b) are found to be affirmative, whether the value of supply of goods constitutes not more than 25 percent of the value of the said composite supply. 4.4 The applicant has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid, Citrate, EDTA and Vitamins to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly labelled poly-packs having thickness of 50 microns or above. It, therefore, appears that the activities undertaken by them for milling of wheat into whea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash consideration paid by the State Government is Rs 179.48/- reduced by Rs 43/-, which comes at Rs 136.48/- per quintal. Further, 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. 4.8 The applicant has contended that the process of fortification does not amount to supply of goods by the applicant rather it is a process carried out by the applicant for provision of its services. According to the applicant, nutrients added in the atta as fortification process cannot be considered as a separate/ distinct supply of goods in addition to the service of milling of wheat into flour as it is an integral part of the process of such conversion. 4.9 The aforesaid submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be the consideration in money and shall also include all the components towards non-cash consideration, as discussed. We also like to reproduce here relevant portion of the memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18th February 2022 issued by the Department of Food Supplies, Government of West Bengal: The State Government is providing 100 Kgs of Wheat to the empanelled Flour mills and it is taking back 95 Kgs of fortified Atta. 5 Kgs of by-products generated are bifurcated into Bran and Refractor in the Ratio 4:1 vide Notification No. 2834-FS dated 06.09.2017. This is also mentioned in the bi-partite agreement between the DCF S/DR and the flour millers. These bi-products are valued as per market price @ Rs.20/kg of Bran and Re 1/kg of Refractor. So, consideration from sale of 4kg Bran and 1kg refractor comes to Rs.81 only. 100 Kg wheat is supplied to flour millers in 2 gunny bags. The flour millers retained those 2 gunny bags, which are valued at Rs.43 only. Thus the total non-cash consideration for bi-products and gunny bags allowed to flower millers is Rs.124 only for each 100 kg wheat. 4.12 The applicant has submitted that since price is not the sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or bi-products and gunny bags allowed to flower millers is Rs.124 only for each 100 kg wheat . So, in the instant case, the amount of Rs.124 may be considered as equivalent to the consideration not in money for the purpose of determination of value of supply under clause (b) of rule 27 of the GST Rules and such amount is admittedly known to the applicant at the time of supply. We therefore find the total value of supply to be Rs.260.48 out of which Rs.136.48 is the cash consideration and Rs.124 is the non-cash consideration, as it has been explained in the aforesaid memo. 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. 4.14 In this context, the order of the West Bengal Appellate Authority for Advance Ruling in the case of M/s Shiv Flour Mill, [Appeal Case No. 02/WBAAAR/APPEAL/2022] may be referred to wherein the Appellate Authority has observed as follows: The WBAAR failed to appreciate that the valuation of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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