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2025 (3) TMI 158 - AAR - GSTValue of supply of services provided by the applicant company to the State Government - rate of tax applicable on the value of supply - inclusion of components 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). HELD THAT - 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 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 - Reference made 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. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT - 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 money if such amount is known 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.124.00 is the non-cash consideration as it has been explained in the aforesaid memo. The value of goods involved in the instant supply stands at Fortification Cost Rs. 10.00 Packing Charges Rs. 50.00 Rs.60.00 against total value of supply of Rs. 260.48 thereby the value of goods involved in the instant composite supply stands at 60/260.48 x 100 23.03% of the total value of supply i.e. it does not exceed 25% of the value of the composite supply. The supply of services provided by the applicant company to the State Government is by nature a composite supply of services by way of milling of food grains into flour (atta) to the Government i.e. Food Supplies Department Govt. of West Bengal for distribution of such flour under Public Distribution System (PDS) which is by way of an activity in relation to a function entrusted to a Panchayat under article 243G covered by entry in sl. no. 28 of the Eleventh Schedule appended to article 243G of the Constitution of India and where as already discussed the value of goods involved in the instant composite supply does not exceed 25% of the value of the composite supply. 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. Conclusion - i) The value of supply involved in this case relating to supply of services provided by the applicant company to the State Government is Rs. 260.48 which comprises of the consideration in money as well as non-cash consideration. ii) The supply of services provided by the applicant company to the State Government is by nature a 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 such flour under Public Distribution System and such is eligible for exemption under entry serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended since the value of goods involved in such composite supply does not exceed 25% of the value of supply.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are: (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 the calculation of the percentage of value of goods in the total value of composite supply for the purpose of Notification No. 2/2018-Central Tax (Rate)? 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Value of Supply of Services - Relevant Legal Framework and Precedents: The determination of the value of supply is governed by Section 15 of the GST Act, which states that the value of a supply of goods or services shall be the transaction value, which is the price actually paid or payable for the said supply. Rule 27 of the GST Rules is applicable when the consideration is not wholly in money. - Court's Interpretation and Reasoning: The Court considered both monetary and non-monetary considerations in determining the value of supply. The total value of supply was calculated as Rs. 260.48, which includes Rs. 136.48 in cash consideration and Rs. 124.00 in non-cash consideration. - Key Evidence and Findings: The applicant receives Rs. 136.48 per quintal from the State Government after deducting Rs. 43 for two gunny bags. Non-cash considerations include the retention of bran and refraction, valued at Rs. 81, and gunny bags valued at Rs. 43. - Application of Law to Facts: The Court applied Rule 27(b) of the GST Rules to include both cash and non-cash considerations in the value of supply. - Treatment of Competing Arguments: The applicant argued that the price is not the sole consideration, and the Court agreed, considering both cash and non-cash elements. - Conclusions: The value of supply is Rs. 260.48, comprising both monetary and non-monetary considerations. Issue (ii): Rate of Tax and Components for Calculation - Relevant Legal Framework and Precedents: Notification No. 2/2018-Central Tax (Rate) and Entry No. 3A of Notification No. 12/2017-Central Tax (Rate) provide exemptions for composite supplies where the value of goods does not exceed 25% of the total value. - Court's Interpretation and Reasoning: The Court examined whether the supply qualifies as a composite supply under the GST Act and whether it relates to functions entrusted to a Panchayat under Article 243G of the Constitution. - Key Evidence and Findings: The supply involves milling wheat into fortified atta, which is a composite supply. The value of goods (fortification and packing materials) is Rs. 60, which is 23.03% of the total supply value. - Application of Law to Facts: The Court found that the supply qualifies for exemption as the value of goods does not exceed 25% of the total value. - Treatment of Competing Arguments: The Revenue argued that the value of goods exceeds 25%, but the Court did not find sufficient evidence to support this claim. - Conclusions: The supply is exempt from GST under Entry No. 3A as the value of goods does not exceed 25% of the composite supply. 3. SIGNIFICANT HOLDINGS - Preserve Verbatim Quotes of Crucial Legal Reasoning: "The value of goods involved in the instant composite supply stands at = 60/260.48 x 100 = 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply." - Core Principles Established: The determination of supply value must consider both monetary and non-monetary considerations. The exemption under Entry No. 3A applies if the value of goods in a composite supply does not exceed 25% of the total value. - Final Determinations on Each Issue: The value of supply is Rs. 260.48, and the supply is exempt from GST as it qualifies under Entry No. 3A of Notification No. 12/2017-Central Tax (Rate).
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