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TMI Blog2023 (7) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... eat 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 - reference made to Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that Public Distribution specifically figures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - SARTHAK SAXENA, AND JOYJIT BANIK, MEMBER Applicant s Representative Heard : Mr. Manish Raj Dhandharia, FCA Preamble A person within the ambit of Section 100 (1) of the Central Goods and Services Tax Act, 2017 or West Bengal Goods and Services Tax Act, 2017 (hereinafter collectively called the GST Act ), if aggrieved by this Ruling, may appeal against it before the West Bengal Appellate Authority for Advance Ruling, constituted under Section 99 of the West Bengal Goods and Services Tax Act, 2017, within a period of thirty days from the date of communication of this Ruling, or within such further time as mentioned in the proviso to Section 100 (2) of the GST Act. Every such appeal shall be filed in accordance with Section 100 (3) of the GST Act and the Rules prescribed thereunder, and the Regulations prescribed by the West Bengal Authority for Advance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the Central Goods and Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2017. In this regard, the applicant has relied upon the decision of Hon ble Telangana High Court in the matter of M/s Srico Projects Pvt. Ltd. vs. Telangana State Authority for Advance Ruling reported in 2022 (9) TMI 418 wherein the Hon ble Court had quashed and set aside the order passed by the respondent authority and held that the respondent was not justified in rejecting the advance ruling application of the petitioner. It was observed that in the absence of any specific definition of the word proceeding , the said word has to be understood in the context in which it is being applied, namely, any proceedings pending or decided in the case of an applicant under the provisions of the CGST Act, it would only mean proceedings where the question raised in the application for advance ruling has already been decided or is pending decision. Therefore, inquiry or investigation which is not in the nature of any proceeding would not come within the ambit of the word proceedings . It cannot be a bar under the first proviso to sub-section (2) of Section 98 of the CGST Act, 2017. The applicant further relied upon the decision of the ruling pronounced by this authority in the matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nversion of wheat provided by the State Government and owned by the State Government, at all times, into atta/ fortified atta, for distribution by the State Government through Public Distribution System (for brevity, PDS), as entrusted under the Eleventh Schedule of the Constitution of India. 2.2 It has been selected for empanelment for crushing of wheat meal atta and fortify it by premixing of micro nutrients containing (i) Vitamin A-500 g RE- 750 g RE, (ii) Vitamin B12- 0.75 g- 1.25 g, (iii) Iron: Ferrous(II) Citrate:28mg-42.5mg or Sodium Iron (III) EDTA: 14 mg-21.5 mg, (iv) Folic Acid- 75 g- 125 g per kg in 1 Kg poly pouch/packet (1 kg wheat 950gm fortified atta)(having thickness of poly pouch not less than 50 microns). 2.3 Under the aforesaid contract, it shall obtain stock of wheat from the State Government. The ownership of wheat remains with the State Government and the applicant is required to convert the wheat into atta by way of crushing and mixing other ingredients as stated earlier. 2.4 The contract specifies that the outturn ratio of atta will be minimum of 95% per quintal of wheat allowing refraction of 1% for cleaning and 4% for debranning to the maxim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 per quintal from the State Government after deduction of Rs 43/- for the 2 gunny bags, which is non-monetary consideration. 2.11 The applicant supplies services to the State Government by way of an activity in relation to a 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. 2.12 Notification No. 2/2018- Central Tax (Rate) dated 25th January, 2018 prescribes 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 243W of the Constitution, as a supply of services which is exempt from GST. 2.13 Circular No. 153/09/2021-GST dated the 17th June, 2021 on the subject GST on milling of wheat into flour or paddy into rice for distributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bran and Re 1/- per kg for refraction. This rate was also confirmed by the memo issued by State Government of West Bengal, Department of Food and Supplies vide memo no. 569(3) - FS/Sectt/Food/4P-02/2016/2021 dated 18.02.2022. Further, as bran and refraction are to be included in the value of supply, the valuation shall be done in accordance with the subsequent paragraphs. 2.18 Since price is not the sole consideration for supply, the provision of Rule 27 would apply which govern the provisions of value of supply of goods or services where the consideration is not wholly in money. 2.19 Rule 27 is reproduced herein under for ease of reference: Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall, - (a) be the open market value of such supply; (b) if the open market value is not available under clause (a), be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply; (c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculation results in the ratio to be 25% or more, then the tax rate applicable is 5%. 2.28 The value of supply is Rs 260.48/- wherein the consideration for component of goods is received as packing charges and fortification charges received which amounts to Rs 60/-. Hence, the ratio comes to 60/260.48 x 100 = 23.03%. Since the component of goods in the composite supply does not exceed 25% of the value of supply, therefore, the supply shall be exempted from GST. 2.29 The Department of Food Supplies of the Government of West Bengal, in its memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18.02.2022 explained that as the maximum value of involvement of goods in the composite supply is less than 25% of the total value of the said composite supply, it qualifies for exemption as per Entry 3A of Notification No. 12/2017- CT(Rate) dated 28.06.2017 read with State Notification No. 1136-FT dated 28.06.2017. 2.30 The applicant, in course of personal hearing, has furnished written submissions arguing further which is reproduced herein under: As per the contract, the amount of consideration is as follows: Particulars Amounts (in Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By virtue of Section 2(30) of the CGST Act, composite supply must consist of two or more taxable supplies provided by the supplier. In the instant case, nutrients added in the atta as fortification process cannot be considered as a separate/ distinct supply of goods in addition to the service of milling of wheat into flour as it is an integral part of the process of such conversion. It is just one step involved in the process of such conversion. 2.30.6 Without prejudice to the above, even if the fortification charges are considered to part of supply of goods, the value of supply of goods as a proportion to the value of the composite supply shall be 23.03% [i.e., 60/260.48 x 100]. Even in this case, the value of supply of goods does not exceed 25% of the value of the composite supply, therefore, the services provided by the Applicant to the State Government shall be liable to exemption from GST. 2.30.7 The Applicant Company also believes in the Appeal filed by M/s Maa Laxmi Enterprise on 31.05.2022 against Advance Ruling Order No. 18/WBAAR/2021-22 dated 31.12.2021, which states the supply value of milling of wheat in the instant case cannot be dependent on actual receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods used for fortification, packing material etc) does not exceed 25% of the value of composite supply. 3.5 Therefore, 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. 4. Observations Findings of the Authority 4.1 We have gone through the records of the issue as well as submissions made by the authorised representative of the applicant during the course of personal hearing. The submission of the officer concerned from the revenue has also been taken on record. 4.2 The issue involved in the instant case, as we find, is to determine whether the instant supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013. In this context, we refer to Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, 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. 4.7 The issue now left with us is to ascertain whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not. The applicant states that it will charge crushing charges from the State Government valued at Rs 179.48 per quintal. This rate was last notified by the Government of West Bengal, Food and Supplies Department vide memo no. 2583(3) FS/Sectt/Food/4P-02/2016 dated 07.09.2018. The applicant further states it will receive wheat from the State Government in gunny bags and the State Government will leave it with them for retention as well as non-moneta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53/09/2021-GST dated 17.06.2021, it has been clarified that entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply ( goods used for fortification, packing material etc ) does not exceed 25% of the value of composite supply. 4.10 Thus, in the instant case, the applicant receives Rs. 10/- and Rs. 50/- i.e., Rs. 60/- in total against fortification cost and packing charges respectively for crushing of 100 kgs of wheat which involves supply of goods. We have to determine whether such value exceeds 25% of the total value of supply or not. According to the applicant, total value of supply would be Rs 260.48/- which includes both cash and non-cash consideration. In this context, we find that in a similar kind of activity, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prejudice to the above, even if the fortification charges are considered to be a supply of goods, the value of supply of goods as a proportion to the value of the composite supply is 23.03% [i.e., 60/260.48 x 100]. 4.13 The contention of the applicant that the provisions of Rule 27(b) will be applicable for the instant case for the purpose of determination of value of supply has duly been considered. Rule 27 of the Central Goods and Services Tax Rules, 2017 and West Bengal Goods and Services Tax Rules, 2017 (collectively referred to as, the GST Rules) prescribes the manner of determination of value of supply where the consideration is not wholly in money. In terms of clause (b) of the said rule, the value of supply shall be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply. We like to reiterate that Department of Food Supplies, Government of West Bengal vide memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18th February 2022 has explained that These bi-products are valued as per market price @ Rs. 20/kg of Bran and Re 1/kg of Refractor. So, consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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