The Andhra Pradesh High Court has quashed the Assessment Order for levying GST on the value of broken rice, bran and husk obtained by the petitioner on milling of the paddy.
The petitioner is a Rice Miller and registered dealer under APGST Act, 2017 on the rolls of respondent authority. The State Government through the Andhra Pradesh Civil Supplies Corporation procures paddy from the ryots and gives to the rice mills for milling and handing over to respondent authority for public distribution.
As a consideration for milling, the respondent authority pays charges at the rate of 15% per one quintal of paddy milled. As per the terms of the agreement, the Rice Millers have to supply rice equivalent to 67% of the paddy given for milling irrespective of the yield.
In fact, the actual yield will be around 61% to 62% only. The balance of 5% to 6% has to be provided by the petitioner to the respondent authority out of his own stock. Therefore, as a compensation/exchange for the same, the respondent allows the petitioner to retain the broken rice, bran and husk obtained in the course of milling of the paddy.
The petitioner sells the said broken rice, bran and husk. The broken rice and husk are exempted from tax and hence, no GST needs to be paid on the same. But, the petitioner pays tax on the bran at the rate of 5%.
The respondent authority contended that the rice miller is running the service of converting the paddy into the rice which is “service”. Thus, the rice miller is the supplier of the service and Government or the Civil Supplies Corporation is the recipient of the service. There is no specific exemption provided to the above said service.
The division bench consisting of Justice U. Durga Prasad Rao and Justice K.Suresh Reddy while allowing the writ petition, quashed the assessment order in so far as it relates to the levy of GST on the value of by-products i.e., broken rice, bran and husk treating them as part of the consideration paid to the petitioner for milling of the paddy.
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