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2023 (7) TMI 246 - 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 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 exceeds 25 percent of the total value of the supply or not? - HELD THAT - It is found 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 - 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 charges of Rs. 50/- 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? - in the instant case, value of supply shall be the consideration in money and shall also include all the components towards non-cash consideration. 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 - 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 - 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.
Issues Involved:
1. Value of supply of services provided by the applicant to the State Government. 2. Applicable tax rate on the value of supply and components to be included in the calculation of the percentage of value of goods in the total value of composite supply under Notification No. 2/2018-Central Tax (Rate). Summary: Issue 1: Value of Supply of Services The applicant, a flour miller, converts wheat provided by the State Government into fortified atta. The ownership of the wheat or atta does not transfer to the applicant. The value of supply includes both cash consideration and non-monetary consideration (gunny bags, bran, and refraction). The cash consideration is Rs. 136.48 per quintal after deducting Rs. 43 for gunny bags from the total Rs. 179.48. Non-monetary considerations include the value of gunny bags, bran, and refraction, valued at Rs. 124 per 100 kg of wheat. Issue 2: Applicable Tax Rate and Calculation of Composite Supply The supply qualifies as a composite supply of goods and services, primarily services, under clause (30) of section 2 of the GST Act. The supply is in relation to a function entrusted to a Panchayat under article 243G of the Constitution. The value of goods in the composite supply (packing material and vitamins) does not exceed 25% of the total value of supply, thus qualifying for exemption under Entry 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The value of goods involved is Rs. 60 against a total value of Rs. 260.48, making the percentage 23.03%. Observations and Findings: The application is admitted as no specific question or show cause notice has been issued by the DGGI at this stage. However, during the refund claim proceeding, it was observed that the supply was not exempt from tax and GST @18% is applicable as the supply was not made to a registered person. Thus, the refund claim of Rs. 5,50,62,464 was found non-refundable. Consequently, the present case is hit by the first provision to Section 98(2) of the GST Act, and no ruling can be passed. Conclusion: The Authority refrains from pronouncing any ruling due to the prior decision by the jurisdictional authority on the same issue.
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