The bench of Sonal K. Mishra and Rajesh Kumar Singh of Authority for Advance Ruling (AAR), Chhattisgarh ruled that 2% Tax Deduction Source (TDS) is applicable on Contract value above Rs. 2,50,000 on payment to Customs millers.
The applicant Chhattisgarh State Cooperative Marketing Federation (MARKFED) sought the advance ruling on TDS on Goods and Services Tax (GST) applicability on the payments made to custom miller.
The applicant executes the work of paddy procurement under Price Support Scheme and to work on supply of chemical fertilizers and plant protection material to the farmers of the state of chhattisgarh as per the instructions of the Government.
The applicant executed an agreement for custom milling of paddy with various custom millers located within the State of Chhattisgarh state for the execution of the said work of custom milling of paddy i.e., production of rice on job work.
The custom miller’s charges, the MARKFED’s milling incentive payments, the transportation of paddy from cooperative societies to the custom miller, the transportation of rice from the custom miller to the delivery centre, and the gunny bags that the custom miller provided to the MARKFED and its usage fees were all observed by the authority.
The bench mentioned that Section 51 of the Central Goods and Services Act (CGST), 2017, allows a department or establishment of the Central Government or State Government; a local authority; a Governmental agency; or such persons or categories of persons as may be notified by the Government on the advice of the Council, (the “deductor”), to deduct tax at the rate of one percent from the payment made or credited to the supplier (“deductee”) of taxable goods or services.
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