2021 (11) TMI 886 - AAR - GST

Exemption under GST - Applicability of N/N. 39/2017-CT(R) dated 18.10.2017 read with G.O.Ms.No. 140 dated 17.10.2017 issued by the Commercial Taxes and Registration Department - activity of manufacture and supply of Fortified Rice Kernels to the Tamil Nadu Civil Supplies Corporation pursuant to the Pilot Scheme on Fortification of Rice , its Distribution under the Public Distribution System project launched by the Central Government - HELD THAT - In the case at hand, the applicability of the Notification was raised before us for the FRK(Premix) supplied by the applicant to the Designated Rice Mills for mixing with the Rice in a fixed proportion and distributing the same under the Scheme duly approved by the Government. As per the submissions, it has been established by the applicant, that the product satisfies the conditions for classifying under CTH 19 basis the Laboratory report furnished by them. It is also established that they undertake supply of FRK as per the tender conditions and supplies the same to the Designated Rice Mills for intended supply under the scheme on mixing the FRK with the Rice in the given proportion. It is also seen that the supply is made based on the demand placed on them vide proceedings issued by the TNCSC and invoice is raised for each such period of supply. The product supplied by the applicant to the rice mills for blending with rice grains is Fortified Rice Kernel (FRK), which per-se is not a 'Food Preparation', in as much as the FRK cannot be consumed as such or after cooking, but FRK is 'goods'. Further the FRK is not directly supplied to the economically weaker sections, but only after blending with rice grains in designated rice mills. The Notification No. 39/2017-C.T.(Rate) dated 18.10.2017 provided the concessional rate to 'Food Preparation' subject to fulfillment of conditions at Column (4) before such amendment. Therefore, the concessional rate under Notification No.39/2017-C.T.(Rate) for the Period 18.10.2017 to 30.09.2021 is not available to the applicant for reasons, that;- (1) FRK is not a food preparation put up in unit containers for free distribution to economically weaker sections and; (2) Applicants are not involved in free distribution of FRK to economically weaker sections. Vide notification No. 11/2021-C.T. (Rate) dated 30.09.2021, the Notification 39/2017 dated 18.10.2017, was amended effective from 01.10.2021, by including the terms Fortified Rice Kernel (Premix) supply for ICDS or similar scheme duly approved by the Central Government or any' State Government in column (3) and also, the words 'Food Preparation' is amended as 'goods' in column (d) of the Notification - The applicant is eligible for the benefit of Notification No. 39/2017-C.T.(Rate) dated 18.10.2017 as amended by Notification No. 11/2021-C.T.(Rate) dated 30.09.2021, effective from 01.10.2021 only, on fulfilling the conditions stipulated thereon in column (d) for such periodic demand and supply of FRK (Premix) made by them and the concessional rate is not eligible to them for the period upto 30.09.2021.

Issues Involved:
1. Classification of Fortified Rice Kernels (FRK) under GST.
2. Applicability of Notification No. 39/2017-CT(R) dated 18.10.2017.
3. Conditions for concessional GST rate on FRK.
4. Impact of Notification No. 11/2021-C.T.(Rate) dated 30.09.2021.

Detailed Analysis:

1. Classification of Fortified Rice Kernels (FRK) under GST:
The applicant contended that FRK falls under Chapter 19 of the Customs Tariff Act, specifically under Tariff Item 1904, which deals with "Prepared foods obtained by the swelling or roasting of cereals or cereal products." The applicant supported this classification with a test report from Nawal Analytical Laboratories certifying the ash and starch content of FRK. The applicant argued that FRK is not a product of the milling industry and should not be classified under Chapter 11, which deals with "Products of the milling industry."

2. Applicability of Notification No. 39/2017-CT(R) dated 18.10.2017:
The applicant sought a ruling on whether Notification No. 39/2017-CT(R) applies to their activity of manufacturing and supplying FRK to the Tamil Nadu Civil Supplies Corporation under the Pilot Scheme for "Fortification of Rice & its Distribution under the Public Distribution System." The notification prescribes a concessional GST rate of 5% (2.5% CGST + 2.5% SGST) for food preparations put up in unit containers and intended for free distribution to economically weaker sections of society under a government-approved program.

3. Conditions for Concessional GST Rate on FRK:
The notification requires that the supplier produces a certificate from an officer not below the rank of Deputy Secretary to the Government of India or the State Government, certifying that the food preparations have been distributed free to economically weaker sections. The applicant argued that their supply of FRK meets these conditions as it is intended for free distribution under a government-approved scheme.

4. Impact of Notification No. 11/2021-C.T.(Rate) dated 30.09.2021:
Effective from 01.10.2021, this notification amended Notification No. 39/2017-CT(R) to include "Fortified Rice Kernel (Premix) supply for ICDS or similar scheme duly approved by the Central Government or any State Government." The amendment also changed the wording from "food preparations" to "goods," implying that FRK (Premix) is now explicitly covered under the concessional GST rate.

Judgment:

Pre-01.10.2021 Period:
The Authority ruled that Notification No. 39/2017-CT(R) is not applicable to the applicant's supply of FRK for the period up to 30.09.2021. The reasons are:
1. FRK is not a food preparation put up in unit containers for free distribution to economically weaker sections.
2. The applicant is not directly involved in the free distribution of FRK to economically weaker sections.

Post-01.10.2021 Period:
The Authority ruled that Notification No. 39/2017-CT(R), as amended by Notification No. 11/2021-C.T.(Rate), is applicable to the supply of FRK (Premix) by the applicant from 01.10.2021 onwards. The conditions stipulated under Column (4) of the amended notification must be fulfilled for the concessional GST rate to apply.

Ruling:
1. Pre-01.10.2021: Notification No. 39/2017-CT(R) is not applicable to the applicant's activity of manufacturing and supplying FRK to the rice mills designated by Tamil Nadu Civil Supplies Corporation for the reasons stated above.
2. Post-01.10.2021: Notification No. 39/2017-CT(R), as amended by Notification No. 11/2021-C.T.(Rate), is applicable to the supply of FRK (Premix) by the applicant for the Pilot Scheme on "Fortification of Rice & its Distribution under the Public Distribution System," subject to the fulfillment of the conditions stipulated under Column (4) of the said Notification.

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