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2023 (7) TMI 245 - AAR - GSTValuation of supply of services provided by the applicant Company to the State Government - Composite supply or not - providing services of crushing wheat provided by the State Government, into fortified atta which in turn is supplied by the State Government through Public Distribution System - rate of tax applicable on the value of supply - components 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). Whether the instant supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended vide Notification No. 2/2018- Central Tax (Rate) dated 25.01.2018) or the same shall be taxable @ 5% as clarified in para 3.2 of the Circular No. 153/09/2021-GST dated 17.06.2021 issued by the CBIC? HELD 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 - 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, value of supply shall be the consideration in money and shall also include all the components towards non-cash consideration - the total value of supply to be Rs. 260.48 out of which Rs. 136.48 is the cash consideration and Rs. 124 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 Rs. 60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it 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.
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 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). Summary: Issue 1: Value of Supply of Services The applicant, a flour miller, engaged in converting wheat provided by the State Government into fortified atta, sought to determine the value of supply of services. The ownership of wheat or atta is never transferred to the applicant. The applicant receives Rs 179.48 per quintal, which includes crushing, fortification, packing, and transportation charges. The applicant also retains gunny bags and by-products (bran and refraction) as non-monetary consideration. The total value of supply is determined to be Rs 260.48, including both cash and non-cash considerations. Issue 2: Rate of Tax Applicable The determination of whether the supply qualifies for exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) hinges on whether the value of goods in the composite supply exceeds 25% of the total value. The applicant argued that the value of goods (packing material and vitamins) is Rs 60/- per quintal, which constitutes 23.03% of the total value of supply (Rs 260.48). Hence, the supply qualifies for exemption as it does not exceed the 25% threshold. Findings: The Authority for Advance Ruling (AAR) analyzed the composite supply, including milling, fortification, and packing, and confirmed it qualifies as a composite supply of services. The supply is made in relation to a function entrusted to a Panchayat under Article 243G of the Constitution. The value of goods involved in the supply is 23.03% of the total value, thus not exceeding the 25% threshold. Ruling: The composite supply of services by way of milling of food grains into flour (atta) to the Food & Supplies Department, Government of West Bengal, for distribution under the Public Distribution System is eligible for exemption under entry serial no. 3A of Notification No. 12/2017-Central Tax (Rate), as amended, since the value of goods involved does not exceed 25% of the value of supply.
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