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TMI Blog2022 (12) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... m milling of paddy merit rejection. Circular No. 19/19/2017-GST dated 20.11.2017 from F. No. 354/263/2017-TRU issued by Government of India Ministry of Finance Department of Revenue Tax research Unit, North Block, New Delhi, clarifies on the subject of taxability of custom milling of paddy holding that milling of paddy into rice is not eligible for exemption under S. No 55 of Notification 12/2017 - Central Tax (Rate) dated 28th June 2017 and corresponding notifications issued under IGST and UTGST Acts. GST rate on services by way of job work in relation to all food and food products falling under Chapters 1 to 22 has been reduced from 18% to5% vide notification No. 31/2017-CT(R) [notification No. 11/2017-CT (Rate) dated 28.6.17, S.No. 26 refers]. Therefore, it is hereby clarified that milling of paddy into rice on job work basis, is liable to GST at the rate of 5%, on the processing charges (and not on the entire value of rice). The activity of custom milling of paddy carried out by the applicant is not exempted from the purview of Goods and Service Tax and is liable to GST at the rate of 5%. - STC/AAR/08/2020 - - - Dated:- 25-11-2020 - SMT. SONAL K. MISHRA AND SHRI RAJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in return the millers ore directed to process the paddy in to rice and thereafter supply it to the State Government. The State Government subsequently supplies the rice to poor people under the public distribution scheme under the State as well as Central pool. iv. That the applicant has to work in accordance with the directions issued by the agency of the State Government, i.e, Chhattisgarh State Marketing Co-operative Federation (CG-MARKFED). The officials of MARKFED direct the applicant to collect and procure paddy from assigned warehouses and thereafter once the paddy is converted into rice, the same has to be supplied to assigned warehouses. The whole process involved with the custom milling of rice involving transportation, storage, conversion, packaging, supply, etc. is a time bound process failing which the applicant is imposed huge penalties. v. That for every year applicant enters into an agreement with MARKFED in relation to custom milling of rice. This agreement incorporates the milling capacity, supply period, penalty clauses, dispute resolution clauses etc. vi. That the rice is supplied to the State Government of Chhattisgarh in pursuance of the Chhattisga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGGST Act. That custom milling of rice is an activity related to a function entrusted to a panchayat under Article 243C of the Constitution of India, wherein the activity of public distribution system is to he carried out by the panchayats. That Entry No. 3A of Circular No. 51/25/2018-GST issued by the Government of India of 31/7/2018 states as to follows: Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity 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 243 W of the Constitution. That the said entry, i.e. 3A was deliberately amended and the scope and ambit of application of exemption was extended so as to benefit the cases as that of the applicant and that composite supply of goods and services in which the value of supply of goods constituted not more than 25 per cent of the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains. The applicant neither forms a part of public distribution system of the state government nor panchayat body, therefore its activity of custom milling does not comes under entry No. 3A to Notification No, 12/2017- Central Tax (Rate) New Delhi, the 28th June, 2017 as amended vide Notification No. 2/2018- Central Tax (Rate), 25th January, 2018. Accordingly, the claimed benefit of tax exemption, citing reference of Circular No. 51/25/2018-GST dated 31/07/2018 is misplaced and thus we come to the conclusion that the applicants claim of any tax exemption on custom milling of paddy merit rejection. 5.3 In the aforesaid context, it is seen that Circular No. 19/19/2017-GST dated 20.11.2017 from F. No. 354/263/2017-TRU issued by Government of India Ministry of Finance Department of Revenue Tax research Unit, North Block, New Delhi, clarifies on the subject of taxability of custom milling of paddy as under:- Representations have been received seeking clarification on whether custom milling of paddy by Rice millers for Civil Supplies Corporation is liable to GST or is exempted under S. No 55 of Notification 12/2017 - Central Tax (Rate) dated 28th June 2017. 2. The matter has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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