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2022 (1) TMI 303 - AAR - GSTEligibility of exemption under GST - composite supply - service by way of milling of food grains into flour to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - rate of GST on such milling, if it does not fall under entry No. 3A - HELD THAT - The applicant, according to the agreement as produced, has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid and Vitamin to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly levelled poly-packs having thickness of 40 microns or above. It, therefore, appears that the 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. 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 - In the instant case, the supply undisputedly fulfils the criteria as referred to in (i) and (ii) above. The applicant receives ₹ 10/- and ₹ 50/- i.e., ₹ 60/- in total against fortification cost and packing charges for crushing of 100 kgs of wheat which involves supply of goods. However, the applicant has not furnished before us any document in support of receipts towards non-cash consideration upon sale of bran, refractory and gunny bags which are claimed to have been sold in the open market by the applicant. In absence of such document, we are unable to ascertain whether the value of supply of goods in the composite supply exceeds 25% of the value of supply or not. Where the non-cash consideration involved in the instant supply is found to the extent of such an amount that the value of supply of goods does not exceed 25% of the total value of supply, the supply shall qualify for exemption vide entry serial 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 corresponding State Tax Notification No. 1136-FT dated 28.06.2017 . Otherwise, the supply shall attract tax @ 5% vide entry serial No. 26 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017.
Issues Involved:
1. Eligibility for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 for composite supply of milling food grains into flour for Public Distribution System. 2. Applicable GST rate if the supply does not qualify for the exemption under entry No. 3A. Issue-wise Detailed Analysis: 1. Eligibility for Exemption under Entry No. 3A: The applicant, engaged in milling food grains into flour for the Food & Supplies Department, Government of West Bengal, sought clarity on whether this composite supply is exempt under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. - Composite Supply: The applicant’s activities, including milling wheat into fortified atta, packing, and fortification, qualify as a "composite supply" under clause (30) of section 2 of the GST Act. The principal supply is the service of milling, with ancillary supplies being fortification and packing. - Function Entrusted to Panchayat/Municipality: The supply is in relation to a function entrusted to a Panchayat under article 243G of the Constitution, specifically public distribution, which is listed in entry 28 of the 11th Schedule to the Constitution. - Value of Goods in Composite Supply: The key condition for exemption under entry No. 3A is that the value of goods in the composite supply should not exceed 25% of the total value. The applicant provided a breakdown showing that the value of goods (fortification and packing charges) is ?60 out of a total value of ?260.48, which is 23.03%, thus meeting this condition. However, the applicant did not furnish documents supporting non-cash considerations (sale of bran, refractor, and gunny bags). Without these, the authority could not conclusively determine if the value of goods exceeds 25%. 2. Applicable GST Rate if Exemption Does Not Apply: If the value of goods exceeds 25% of the composite supply, the supply would not qualify for the exemption under entry No. 3A. In such cases, the applicable GST rate would be 5% (CGST @ 2.5% + WBGST @ 2.5%) as per entry No. 26 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which pertains to job work services for food and food products. Ruling: 1. The composite supply of milling food grains into flour for the Food & Supplies Department is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, provided the value of goods does not exceed 25% of the total value of supply. 2. If the value of goods exceeds 25%, the supply will attract a GST rate of 5% (CGST @ 2.5% + WBGST @ 2.5%) under entry No. 26 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. This ruling is valid subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.
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