9911796707
TMI Blog2023 (9) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset, we would like to make it clear that 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 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 Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon'ble West Bengal Authority of Advance Ruling in the matter of Jai Lokenath Flour Mills Private Limited bearing case number WBAAR 26 of 2022, where Hon'ble 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'. 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 95% per quintal of wheat allowing refraction of 1% for cleaning and 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sl. No. 3 A 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 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 considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tax (Rate) dated 28.06.2017 (corresponding State Notification No. 1136 FT dated 28.06.2017) and exempt from taxation. 3. Submission of the Revenue The officer concerned from the revenue has not expressed any view on the issue raised by the applicant. 4. Obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta/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. In this context, we refer 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 under article 243G of the Constitution. 4.7 The issue now left with us is to ascertain whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not. The applicant states that it will charge crushing charges from the State Government value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 charges of Rs. 50/-. In para 3.1 of Circular No. 153/09/2021-GST dated 17.06.2021, it has been clarified that '...entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods used for fortification, packing material etc) does not exceed 25% of the value of composite supply.' 4.10 Thus, in the instant case, the applicant receives Rs. 10/- and Rs. 50/- i.e., Rs. 60/- in total against fortification cost and packing charges respectively for crushing of 100 kgs of wheat which involves supply of goods. We have to determine whether such value exceeds 25% of the total value of supply or not. According to the applicant, total value of supply would be Rs 260.48/- which includes both cash and non-cash consideration. In this context, we find that in a similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 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 as we find in his submission noted in point no. 1.1.6 in Para 2.30 wherein the applicant has stated that 'without prejudice to the above, even if the fortification charges are considered to be a supply of goods, 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]. 4.13 The contention of the applicant that the provisions of Rule 27(b) will be applicable for the instant case for the purpose of determination of value of supply has duly been considered. Rule 27 of the Central Goods and Services Tax Rules, 2017 and West Bengal Goods and Services Tax Rules, 2017 (collectively referred to as, the GST Rules) prescribes the manner of determination of value of supply where the consideration is not wholly in money. In terms of clause (b) of the said rule, the value of supply shall be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (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. In view of the above discussions, we rule as under: RULING In the instant case, value of supply shall be the consideration in money as well as non-cash consideration, as discussed. This composite supply of services by way of milling of food grains into flour (atta) to Food & Supplies Department, Govt. of West Bengal for distribution of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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