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2022 (9) TMI 203 - AAAR - GSTExemption from GST - composite supply of services - milling of food grains into flour to Food Supplies Department, Government of West Bengal for distribution under PDS - Applicability of entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Rate of tax, if the supply is not exempt - HELD THAT - It has already been accepted by the WBAAR in its ruling IN RE M/S. SHIV FLOUR MILL 2022 (1) TMI 303 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL , that the total value of composite supply will comprise both cash and non-cash considerations. The WBAAR did not consider the valuation of Rs.124/- per 100 kg wheat being supply consideration of gunny bags, refractor and bran. It erred in its opinion that the non-cash consideration will be the actual sum received from open market on supply of gunny bags, refractor and bran. The WBAAR failed to appreciate that the valuation of the composite supply is the agreed upon price between the flour millers and the Food Supplies Department. This agreed upon price includes the notional value of Rs.124/- of two gunny bags and 5 kg by-products (1 kg refractor and 5 kg bran) which are retained by the miller, irrespective of actual disposal price of those gunny bags and by-products in future. The supply value of milling of wheat in the instant case cannot be dependent on actual receipts by the miller in future from third parties in disposal of the retained goods - The value of goods in the composite supply is not more than Rs.60/- being cost of elements for fortification and packing materials. So the percentage of value of goods in the composite supply is established to be lesser than 25% of the total supply value. In the instant case the supply of fortified wholemeal flour to the Food Supplies Department, Government of West Bengal will fall under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (corresponding State Notification No. 1136 FT dated 28.06.2017) and exempt from taxation. Appeal disposed off.
Issues Involved:
1. Eligibility for tax exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 2. Valuation of composite supply, including cash and non-cash considerations. Issue-wise Detailed Analysis: 1. Eligibility for Tax Exemption: The primary issue was whether the composite supply of services by milling food grains into flour for the Food & Supplies Department, Government of West Bengal, is eligible for exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. According to the West Bengal Authority for Advance Ruling (WBAAR), for a supply to qualify for exemption, it must: - Be provided to a Government/Local Authority/Governmental Authority/Government Entity. - Relate to any function entrusted to a Panchayat under article 243G or a Municipality under article 243W of the Constitution. - Ensure the value of goods in the composite supply does not exceed 25% of the total supply value. The WBAAR acknowledged that the first two criteria were met. However, the critical question was whether the value of goods supplied (micronutrients and packing materials) exceeded 25% of the total value of the composite supply. The WBAAR initially ruled that the valuation of non-cash considerations (gunny bags, bran, and refractor) was inconclusive due to a lack of documentary evidence. 2. Valuation of Composite Supply: The appellant argued that the valuation should be based on the agreed price between the appellant and the Food & Supplies Department, which includes both cash and non-cash considerations. The total consideration for milling 100 kg of wheat was Rs. 260.48, comprising: - Cash consideration: Rs. 136.48 - Non-cash consideration: Rs. 124.00 (including the value of gunny bags, bran, and refractor) The appellant contended that the WBAAR erred by considering the actual market value of non-cash considerations rather than the agreed notional value. The appellant provided documentary evidence, including invoices and memos from the Food & Supplies Department, supporting the agreed valuation. Judgment: The appellate authority examined the submissions and concluded that the valuation of the composite supply should be based on the agreed price of Rs. 260.48, which includes the notional value of non-cash considerations. They determined that the value of goods (Rs. 60 for micronutrients and packing materials) in the composite supply was less than 25% of the total supply value, thus fulfilling the exemption criteria under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Conclusion: The appellate authority ruled that the supply of fortified wholemeal flour to the Food & Supplies Department qualifies for tax exemption under the specified notification. The Advance Ruling No. 16/WBAAR/2021-22 dated 31.12.2021 was modified accordingly, and the appeal was disposed of. Copies of the order were sent to both the appellant and the respondent for their information.
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