TMI Blog2023 (7) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices 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 Bengal Goods and Services Tax Act, 2017, within a period of thirty days from the date of communication of this Ruling, or within such further time as mentioned in the proviso to Section 100 (2) of the GST Act. Every such appeal shall be filed in accordance with Section 100 (3) of the GST Act and the Rules prescribed thereunder, and the Regulations prescribed by the West Bengal Authority for Advance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent authority and held that the respondent was not justified in rejecting the advance ruling application of the petitioner. It was observed that in the absence of any specific definition of the word proceeding , the said word has to be understood in the context in which it is being applied, namely, any proceedings pending or decided in the case of an applicant under the provisions of the CGST Act, it would only mean proceedings where the question raised in the application for advance ruling has already been decided or is pending decision. Therefore, inquiry or investigation which is not in the nature of any proceeding would not come within the ambit of the word proceedings . It cannot be a bar under the first proviso to sub-section (2) of Section 98 of the CGST Act, 2017. The applicant further relied upon the decision of the West Bengal Authority for Advance Ruling in the matter of Jai Lokenath Flour Mills Private Limited bearing case number WBAAR 26 of 2022, where the members 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernor of the State of West Bengal represented by the District Controller of Food Supplies (hereinafter referred to as the State Government) for conversion of wheat provided by the State Government and owned by the State Government, at all times, into atta/ fortified atta, for distribution by the State Government through Public Distribution System (for brevity, PDS), as entrusted under the Eleventh Schedule of the Constitution of India. 2.2 It has been selected for empanelment for crushing of wheat meal atta and fortify it by premixing of micro nutrients containing (i) Vitamin A-500 g RE- 750 g RE, (ii) Vitamin B12- 0.75 g- 1.25 g, (iii) Iron: Ferrous(II) Citrate:28mg-42.5mg or Sodium Iron (III) EDTA: 14 mg-21.5 mg, (iv) Folic Acid- 75 g- 125 g per kg in 1 Kg poly pouch/packet (1 kg wheat 950gm fortified atta)(having thickness of poly pouch not less than 50 microns). 2.3 Under the aforesaid contract, it shall obtain stock of wheat from the State Government. The ownership of wheat remains with the State Government and the applicant is required to convert the wheat into atta by way of crushing and mixing other ingredients as stated earlier. 2.4 The contract specifies that the outturn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices to the State Government by way of an activity in relation to a 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. 2.12 Notification No. 2/2018- Central Tax (Rate) dated 25th January, 2018 prescribes composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity 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, as a supply of services which is exempt from GST. 2.13 Circular No. 153/09/2021-GST dated the 17th June, 2021 on the subject GST on milling of wheat into flour or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FS/Sectt/Food/4P-02/2016/2021 dated 18.02.2022. Further, as bran and refraction are to be included in the value of supply, the valuation shall be done in accordance with the subsequent paragraphs. 2.18 Since price is not the sole consideration for 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. 2.19 Rule 27 is reproduced herein under for ease of reference: Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall, - (a) be the open market value of such supply; (b) if the open market value is not available under clause (a), be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply; (c) if the value of supply is not determinable under clause (a) or clause (b), be the value 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10/- per quintal respectively. Such value of the packing material and vitamins are 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 and vitamins are not determinable at the time when GST is levied. Hence, consideration of the actual cost of packing material and vitamins would render the application of the aforesaid notification impossible. 2.29 The value of supply is Rs 260.48/- wherein the consideration for component of goods is received as packing charges and fortification charges received which amounts to Rs 60/-. Hence, the ratio comes to 60/260.48 x 100 = 23.03%. Since the component of goods in the composite supply does not exceed 25% of the value of supply, therefore, the supply shall be exempted from GST. 2.30 The Department of Food Supplies of the Government 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 Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. 4. Observations Findings of the Authority 4.1 We have gone through the records of the issue as well as submissions made by the authorized representative of the applicant during the course of personal hearing. The submission of the officer concerned from the revenue has also been taken on record. 4.2 The issue involved in the instant case, as we find, is to determine 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. 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 Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant states that it 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 07.09.2018. The applicant further states it will receive wheat from the State Government in gunny bags and the State Government will leave it with them for retention as well as non-monetary consideration and so the cost of gunny bags valued at Rs. 43/- is reduced from the amount of Rs 179.48/- as the State Government considers the retention of gunny bags by the applicant as non-monetary consideration. Therefore, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-cash consideration. In this context, we find that in a similar kind of activity, the Appellate Authority for Advance Ruling (AAAR, for short), Andhra Pradesh in the matter of Sri Kanakadurga Rice and Flour Mill reported in [2020] 121 taxmann.com 121 (AA - GST - AP) held that it is clear that the value of by-products so retained by the appellant yielded during CMR milling, which were allowed to be retained by the appellant to meet the CMR activity cost shall obviously be included as part of value of supply and also to be termed as a bona fide form of consideration 4.11 We are also of the same view that in the instant case, value of supply shall 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 Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 2022 has explained that These by-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 by-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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to by the company with the State Govt. that was made on 3rd March, 2022. Therefore, whether the composite supply during the period from 01.07.2017 to December, 2020 was made to the State Govt. or not could not be ascertained. The Noticee claimed that the judgement made by the West Bengal Authority for Advance Ruling in the case of M/s. Berhampur Warehousing Private Limited [2022(9) TMI 367] and the judgement made by the Appellate Authority for Advance Ruling, West Bengal in the case of M/s. Maa Laxmi Enterprise [2022(9) TMI 202] are applicable to them as the case of the noticee is identical with the business entity. They further claimed that the State Govt vide Notification No. 2834-FS/Sectt/Food/4P-14/2013 dated 06.09.2017 published in the official Gazette of Kolkata, have specified rate of supply of goods and services and terms of the contract which were also same for all the flour mills. The claim of the noticee is based on the fact that the terms and condition laid down in said notification were also completely identical for all the millers. But in the absence of any contract between the noticee and the State Govt. during the period under consideration it could not be ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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