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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 ..... 18. 1.1 At the outset, we would like to make it clear that the Central Goods and Services 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 a flour miller, engaged in 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. The ownership of wheat or atta is never transferred to the Applicant. 1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01: (i) What is the value of supply of services provided by the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the ruling pronounced by this authority in the matter of Jai Lokenath Flour Mills Private Limited bearing case number WBAAR 26 of 2022, where the members admitted the application considering the decision of Hon'ble High Court and agreed to the fact that the inquiry or investigation would not come within the ambit the word 'proceeding'. 1.7 The officer concerned from the revenue has raised no objection to the admission of the application. 1.8 In terms of first proviso to sub-section (2) of section 98 of the GST Act, an application for Advance Ruling made under sub-section (1) of section 97 shall not be admitted by the Authority where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the GST Act. We have duly considered the submission made by the applicant. We find that the fact of the case of M/s Srico Projects Pvt. Ltd. vs. Telangana State Authority for Advance Ruling, on which the applicant has placed his reliance, is different from the case of the applicant. In the above-referred case, the application for advance ruling was filed on 11.05.2019 and notice was issued by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of 1% for cleaning and 4% for debranning to the maximum. The applicant, as per the contract, will retain 1 kg refraction and 4 kg bran against conversion of 100 kg wheat. The applicant will further retain 2 gunny bags in which 100 kgs of wheat is supplied to him. 2.5 The contract stipulates that it shall pack the crushed stock of whole wheat atta after fortification into the poly pouches of 1 kilogram each in properly labelled poly-packs having thickness of 50 microns and or above and it will deliver the stock to the M.R. Distributors as nominated by the State Government for distribution to the consumers, immediately after the process of crushing. 2.6 The applicant does not gain ownership of either wheat or atta in the entire process of crushing it. This is substantiated by Clause 10(4) of the contract which states that the applicant shall under no circumstances sell the stock of atta in the open market. The atta is distributed only through PDS. 2.7 During the process of conversion of wheat into atta, two types of wastes are generated, namely bran and refraction. The bran and refraction so generated will subsequently be retained by it and sold in the open market at the preva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Tax (Rate) dated 28.06.2017 for the reason that value of goods supply in such a composite supply exceeds 25%, then the applicable GST rate would be 5% if such composite 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. 2.14 The provisions regarding value of supply are contained in Section 15 of the Act. Sub-section (1) of Section 15 states that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. 2.15 In the given case price is not the sole consideration for the supply and as per the contract t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money as determined by the application of rule 30 or rule 31 in that order. 2.20 Further, since the crushing service supplied by the applicant is customized, its open market value is not available at the time of supply and therefore the provisions of Rule 27(b) will be applicable for the instant case. 2.21 The cash consideration is Rs 136.48/- per quintal. The non-monetary considerations include gunny bags, bran and refraction. The value of these non-monetary considerations is known at the time of supply as the net realizable value is ascertainable. 2.22 Value of 2 gunny bags should be included in value of supply on the basis of consideration as defined by the Food and Supplies Department of Government of West Bengal in their Department vide memo no. 2583(3) - FS/Sectt/Food/4P-02/2016. 2.23 Value of supply shall include the cash consideration received and net realizable value (i.e., sale value reduced by further processing costs) of non-monetary consideration which include gunny bags, bran and refraction. 2.24 As per Circular No. 153/09/2021- GST dated the 17th June, 2021, if exemption is not available to the flour millers, owing to conversion of wheat into flour not being eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Refraction (1Kg per quintal @ Rs.1/- per Kg) 01.00 (B) Total non-monetary consideration 81.00 Total consideration (A) + (B) 260.48 2.30.1 It is reiterated that the rate of tax applicable on services provided by the Applicant is 5%, if it does not qualify for exemption granted vide Notification No. 2/2018 - Central Tax (Rate), by virtue of Circular No. 153/09/2021 - GST dated 17.06.2021. 2.30.2 The component of goods in the said composite supply is packing material only. The value of supply of such packing material is Rs. 50/- per quintal. Such value of the packing material is calculated as per the cost sheet provided by the State Government and not as per actuals. Owing to the continuous nature of the contract, the actual value of the packing material is not determinable at the time when GST is levied. Hence, consideration of the actual cost of packing material would render the application of the aforesaid notification impossible. 2.30.3 The value of supply of goods as a proportion to the value of the composite supply is 19.20% [i.e., 50/260.48 x 100]. Since the value of supply of goods does not exceed 25% of the value of the composite supply, the services provided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant which are mentioned below:- 3.1 M/s Sri Durga Food Products Pvt Ltd (GSTIN: 19AADCS7558P1ZE) (hereinafter will be referred as the applicant), a registered tax payer, is engaged in converting of whole wheat into atta in West Bengal. 3.2 The activities undertaken by the applicant 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. 3.3 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. 3.4 The revenue officer observed that the total value of supply to be Rs. 260.48 out of which Rs. 136.48 [Rs. 179.00 (for crushing of 100 kgs of wheat which includes fortification cost of Rs. 10/- and packing charges of Rs. 50/-) - Rs. 43.00 (Cost of gunny bags) = Rs. 136.00] is the cash consideration and Rs. 124 (Rs. 43.00 (cost of gunny bags)+ Rs. 80.00 (Cost of Bran) + Rs. 1.00 (Cost of Refraction) = Rs. 124.00] is the non-cash consideration. So the value of goods involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the value of supply of goods constitutes not more than 25 percent of the value of the said composite supply. 4.4 The applicant has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid, Citrate, EDTA and Vitamins to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly labelled poly-packs having thickness of 50 microns or above. It, therefore, appears 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. 4.5 Now we take the issue to decide 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. 4.6 The agreement between the applicant and the State Government for supply of fortif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bengal, Department of Food and Supplies vide memo no. 569(3) - FS/Sectt/Food/4P02/2016/2021 dated 18.02.2022. 4.8 The applicant has contended that the process of fortification does not amount to supply of goods by the applicant rather it is a process carried out by the applicant for provision of its services. According to the applicant, 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. 4.9 The aforesaid submission of the applicant as referred to in the preceding paragraphs has been considered. We find from the agreement made between the applicant and the State Government that the applicant has been selected for empanelment for crushing of wheat into whole meal atta and fortify it by pre-mixing micro-nutrients and to pack it in 1Kg poly pouch/packet and to deliver the same to the nominated M.R. Distributors. We have already expressed our view that such activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also mentioned in the bi-partite agreement between the DCF&S/DR and the flour millers. These bi-products are valued as per market price @ Rs. 20/kg of Bran and Re 1/kg of Refractor. So, consideration from sale of 4kg Bran and 1kg refractor comes to Rs. 81 only. 100 Kg wheat is supplied to flour millers in 2 gunny bags. The flour millers retained those 2 gunny bags, which are valued at Rs. 43 only. Thus the total non-cash consideration for bi-products and gunny bags allowed to flower millers is Rs. 124 only for each 100 kg wheat." 4.12 The applicant has submitted that since price is not the sole consideration for the instant 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 (refer to Para 2.18). The applicant has further submitted that since the crushing services supplied by the applicant is customized, its open market value is not available at the time of supply and therefore the provisions of Rule 27(b) will be applicable for the instant case (refer to Para 2.20). Furthermore, in Para 2.21, the applicant has submitted that 'the non-monetary considerations include gunny ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 4.14 In this context, the order of the West Bengal Appellate Authority for Advance Ruling in the case of M/s Shiv Flour Mill, [Appeal Case No. 02/WBAAAR/APPEAL/2022] may be referred to wherein the Appellate Authority has observed as follows: "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. It is clear from Memo No. 2979(3)-FS/Sect./Food/4P-02/2016 dated 08.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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