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2022 (4) TMI 400 - AAR - GSTValuation of supply of services - exempt supply or not - services provided by the applicant for conversion of wheat provided by the State Government, into wheat meal atta and fortify it by premixing of micro nutrients for further distribution by the State Government through Public Distribution System - rate of GST applicable on the value of supply - components are 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) - supply is made by way of any activity 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 or not - HELD THAT - There was a difference of opinion between the State GST authorities and Central GST authorities in respect of rate of tax applicable on the supply provided by the applicant. Though this issue has been clarified by the CBIC vide Circular No. 153/09/2021-GST dated the 17th June, 2021, the rate is applicable only when the supply of services does not qualify as an exempt supply vide entry serial number 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. Further, whether the supply stands exempted or not in terms of entry serial number 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, determination of value of the composite supply along with the value of supply of goods involved in the said supply is an essential element - applicant has filed the instant application seeking advance ruling on what is the value of supply of services provided by the applicant and also what components are to be included to determine the value of the goods. No ruling is given for the instant case since the questions raised in the instant application is a subject matter which is found to be pending in case of the applicant under the provisions of the GST Act.
Issues Involved:
1. Value of supply of services provided by the applicant to the State Government. 2. Rate of tax applicable on the value of supply and the components 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). Detailed Analysis: 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 wheat or atta is never transferred to the applicant. - The applicant receives ?179.48 per quintal for the conversion, which includes crushing, fortification, packing, and transportation charges. - The applicant retains the bran and refraction generated during the process, which are sold in the open market. - The State Government considers the retention of gunny bags as a non-monetary consideration, reducing the cash consideration to ?136.48 per quintal. - The applicant argues that the value of supply should be ?179.48 per quintal as per Section 15 of the GST Act read with Rule 27 of the Rules, which includes both monetary and non-monetary considerations. Issue 2: Rate of Tax Applicable - The applicant contends that their services fall under an activity related to a function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. - Notification No. 2/2018- Central Tax (Rate) exempts composite supply of goods and services where the value of goods does not exceed 25% of the total value. - Circular No. 153/09/2021-GST clarifies that if the value of goods exceeds 25%, the applicable GST rate is 5% for job work services provided to a registered person. - The applicant calculates that the value of goods (packing charges) is ?50 out of ?179.48, which is 27.86%, thus exceeding the 25% threshold, making the applicable GST rate 5%. Observations & Findings: - The Authority observed that the core issue is whether the supply qualifies as an exempt supply under entry serial no. 3A of Notification No. 12/2017 or is taxable at 5% as per Circular No. 153/09/2021-GST. - During the hearing, it was revealed that a proceeding by the Directorate General of GST Intelligence (DGGI) is pending against the applicant, and a writ petition has been filed before the High Court. - The applicant argued that no specific matter is pending or decided by the DGGI as no show cause notice or demand order was issued. - The High Court noted a dispute regarding the classification of the entry under which the transaction falls, with differing opinions between State and Central GST authorities. - The Authority concluded that the question raised is pending in proceedings under the GST Act, thus disqualifying the application under the first proviso of section 98(2) of the GST Act. Conclusion: No ruling is given since the questions raised in the application are pending in proceedings under the provisions of the GST Act.
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