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TMI Blog2022 (1) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression GST Act would mean the CGST Act and the WBGST Act both. 1.2 The applicant is stated to be engaged in the business of selling flour (atta) and providing service of job work in the nature of crushing food grains supplied and owned by Food Supplies Department, Government of West Bengal. 1.3 The applicant submits that he has entered into an agreement with the District Controller of Food and Supplies, Kolkata, Government of West Bengal for supply of fortified Wholemeal Atta. According to the said agreement, the State Govt. (Food Supplies Department) sends the whole, unpolished food grain to the applicant for crushing and processing it into flour. The applicant returns the flour(atta) packed in the manner as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Essential Commodities Act 1955 and the same extends to the whole of West Bengal except the area where the West Bengal Urban Public Distribution System (Maintenance and Control) Order, 2013 is in force with Government of India Ministry of Consumer Affairs. 2.2 The West Bengal Urban Public Distribution System (Maintenance and Control) Order, 2013 has been issued in exercise of the power conferred by Section 3 of the Essential Commodities Act 1955 read with the Ministry of Consumer Affairs, Food and Public Distribution Department Order No. G.S.R. 630(E) dated 31.08.2001. It extends to the urban area of West Bengal. 2.3 The West Bengal Public Distribution System (Empanelment of Flour Mill and Milling of Fortified Atta/Wholemeal Atta) guidelines 2017 has been framed in pursuance of clause 36 and 37 of the West Bengal Public Distribution system (Maintenance and Control) Order 2013 and clause 33 and 34 of West Bengal Urban Public Distribution System and is in control 2013. Agreement herein means agreement made between the state government and owners of flour mills thereof in accordance with the provision of the said Guidelines, 2017, as defined in Para 2(1)(a) of the said Guideline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) By crushing 100 kgs of wheat, 95 kgs of flour and by-product in the form of 4 Kgs of Bran and 1 kg of refractor is generated. (e) The cash consideration paid for the senders of crushing is ₹ 136.48/-. (f) Further, the applicant also gets non cash consideration in the form of being allowed to retain 4 Kgs of Bran and 1 kg of refractor which is sold in the open market realizing ₹ 81. Further ₹ 43/- is realized by selling gunny bags which is used by the State Government for sending gunny bags to the applicant. (g) Therefore, total non-cash consideration is ₹ 124/-. (h) Details of cash and non-cash consideration is as below: - Flour Millers to be paid for crushing of 100 kg of Wheat Cost for of 95 Kg Atta (in Rs.) A Crushing Charges 90.78 B Fortification, Costs 10 C Packing Charges 50 D Transportation Handling Charges 28.7 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of Applicability of GST on the Flour Mills for crushing of Wheat into Fortified Atta for PDS . In the said letter, the Special Secretary to the Govt. of West Bengal, Food and Supplies Department has observed as follows: In view of above, it appears that GST is not applicable on the Flour Mills for crushing of wheat into fortified atta under the Govt. Scheme for Public Distribution System. 2.8 The applicant has contended that services in the nature of crushing food grains supplied and owned by Food Supplies Department, Govt. of West Bengal is exempt from the levy of GST vide sl. no. 3A of the notification No. 12/2017- CT (R) dated 28.06.2017. 2.9 The applicant has argued further that the flour is packed in the packing material procured by him and thus he is making a bundled supply of the services of crushing of the grains along with supply of packing materials. They are supplied in conjunction with each other in the ordinary course of business as food grain cannot be transported without proper packing. It is, therefore, a composite supply of goods and services where services of crushing food grains is the principal supply and providing packing materials is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te supply is provided to a registered person, being a job work service (entry No. 26 of notification No. 11/2017- Central Tax (Rate) dated 28.06.2017). Combined reading of the definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51] makes it clear that a person registered only for the purpose of deduction of tax under section 51 of the CGST Act is also a registered person for the purposes of the said entry No. 26, and thus said supply to such person is also entitled for 5% rate. 2.13 On the basis of above-mentioned facts and the provisions of law, the applicant has submitted that the instant composite supply of 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 is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Alternatively, even if it is assumed without accepting that the aforesaid exemption is not available to the applicants, the services by way of job work in relation to all food and food products falling under Chapters 1 to 22 in the First Schedule to the Customs Tariff Act, 1975 (5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d composite supply. 4.3 Clause (30) of section 2 of the GST Act defines composite supply as under: composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration .- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; 4.4 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 fortifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity, the Appellate Authority for Advance Ruling (AAAR, for short), Andhra Pradesh in the matter of Sri Kanakadurga Rice and Flour Mill reported in [2020] 121 taxmann.com 121 (AA - GST - AP) held that it is clear that the value of by-products so retained by the appellant yielded during CMR milling, which were allowed to be retained by the appellant to meet the CMR activity cost shall obviously be included as part of value of supply and also to be termed as a bona fide form of consideration . 4.9 The applicant has submitted that he gets non-cash consideration in the form of being allowed to retain 4 kgs of bran and 1 kg of refractor which is sold in the open market realizing ₹ 81. Further ₹ 43/- is realized by selling gunny bags which is used by the State Government for sending gunny bags to the applicant. 4.10 Thus, the value of supply for providing milling services to convert 100 kgs of wheat supplied by the State Government into 95 kg of fortified atta, according to the applicant, comes at ₹ 136.48 + ₹ 124.00 [ Cost of 02 gunny bags : ₹ 43/- + Receipt from sale of bran and refractors : ₹ 81/-] = ₹ 260.48 4.11 A composite supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration 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% (CGST @ 2.5% + WBGST @ 2.5%) vide entry serial No. 26 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 [corresponding State Tax Notification No. 1135-FT dated 28.06.2017]. In view of the above discussions, we rule as under: RULING (1) In the instant case, value of supply shall be the consideration in money and shall also include all the components towards non-cash consideration, as discussed. This composite 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 entry serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 only when the value of goods involved in s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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