TMI Blog2023 (7) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 - the instant composite supply made by the applicant is found to be in relation to any fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression GST Act would mean the CGST Act and the WBGST Act both. 1.2 The Applicant is a flour miller, engaged in 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. The ownership of wheat or atta is never transferred to the Applicant. 1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01: (i) What is the value of supply of services provided by the applicant Company to the State Government? (ii) What is the rate of tax applicable on the value of supply? What components are to be included in calculation of the % of value of goods in the total value of composite supply for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the matter of Jai Lokenath Flour Mills Private Limited bearing case number WBAAR 26 of 2022 , where the bench had admitted advance ruling application by considering the decision of Hon ble High Court and agreed to the fact that the inquiry or investigation would not come within the ambit the word proceeding . 1.7 The officer concerned from the revenue has raised no objection to the admission of the application. 1.8 In terms of first proviso to sub-section (2) of section 98 of the GST Act, an application 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4% for debranning to the maximum. The applicant, as per the contract, will retain 1 kg refraction and 4 kg bran against conversion of 100 kg wheat. The applicant will further retain 2 gunny bags in which 100 kgs of wheat is supplied to him. 2.5 The contract stipulates that it shall pack the crushed stock of whole wheat atta after fortification into the poly pouches of 1 kilogram each in properly labelled poly-packs having thickness of 50 microns and or above and it will deliver the stock to the M.R. Distributors 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paddy into rice for distribution by State Governments under PDS, states that In case the supply of service by way of milling of wheat into flour or of paddy into rice, is not eligible for exemption under Sl. No. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 for the reason that value of goods supply in such a composite supply exceeds 25%, then the applicable GST rate would be 5% if such composite supply is provided to a registered person, being a job work service (entry No. 26 of notification 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of supply of goods or services or both of like kind and quality; (d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by the application of rule 30 or rule 31 in that order. 2.20 Further, since the crushing service supplied by the applicant is customized, its open market value is not available at the time of supply and therefore the provisions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of West Bengal, in its memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18.02.2022 explained that as the maximum value of involvement of goods in the composite supply is less than 25% of the total value of the said composite supply, it qualifies for exemption as per Entry 3A of Notification No. 12/2017- CT(Rate) dated 28.06.2017 read with State Notification No. 1136-FT dated 28.06.2017. 2.31 The applicant also believes in the Appeal filed by M /s Maa Laxmi Enterprise on 31.05.2022 against Advance Ruling Order No. 18/WBAAR/2021-22 dated 31.12.2021, which states that - the supply value of milling of wheat in the instant case cannot be dependent on actual receipts by the miller in future from third parties in disposal of the retained goods- The value of goods in the composite supply is not more than Rs. 60/- being cost of elements for fortification and packing materials. So the percentage of value of goods in the composite supply is established to be lesser than 25% of the total supply value. In the instant case the supply of fortified whole meal flour to the Food Supplies Department, Govt. of West Bengal will fall under entry no. 3A of Notification No. 12/2017-Central ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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. 4.5 Now we take the issue to decide 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. 4.6 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the applicant as referred to in the preceding paragraphs has been considered. We find from the agreement made between the applicant and the State Government that the applicant has been selected for empanelment for crushing of wheat into whole meal atta and fortify it by pre-mixing micro-nutrients and to pack it in 1Kg poly pouch/packet and to deliver the same to the nominated M.R. Distributors. We have already expressed our view that such 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. The State Government agrees to pay the applicant a total amount of Rs. 179.48 for crushing of 100 kgs of wheat which includes fortification cost of Rs. 10/- and packing char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. The flour millers retained those 2 gunny bags, which are valued at Rs. 43 only. Thus the total non-cash consideration for by-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 consideration for the instant supply, the provision of Rule 27 would apply which govern the provisions of value of supply of goods or services where the consideration is not wholly in money. The applicant has further submitted that since the crushing services supplied by the applicant is customized, its open market value is not available at the time of supply and therefore the provisions of Rule 27(b) will be applicable for the instant case. Furthermore, the applicant has submitted that 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 . Having said that, the applicant has finally accepted the total value of supply to be Rs. 260.48 wherein the value of supply of goods as a proportion to the value of the composite supply is 23.03% [i.e., 60/260.48 x 100]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciate that the valuation of the composite supply is the agreed upon price between the flour millers and the Food Supplies Department. This agreed upon price includes the notional value of Rs. 124/- of two gunny bags and 5 kg by-products (1 kg refractor and 5 kg bran) which are retained by the miller, irrespective of actual disposal price of those gunny bags and by-products in future. The supply value of milling of wheat in the instant case cannot be dependent on actual receipts by the miller in future from third parties in disposal of the retained goods. It is clear from Memo No. 2979(3)-FS/Sect./Food/4P-02/2016 dated 08.12.2020 read with Memo No. 569(3)-FS/Sect./Food/4P-02/2016/2021 dated 18.02.2022 that the total supply price is Rs. 260.48 for milling services to produce 95 kg fortified atta from 100 kg wheat. The value of goods in the composite supply is not more than Rs. 60/- being cost of elements for fortification and packing materials. So the percentage of value of goods in the composite supply is established to be lesser than 25% of the total supply value. 4.15 We, therefore, hold that the instant supply of services by way of milling of food grains into flour (att ..... X X X X Extracts X X X X X X X X Extracts X X X X
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