The West Bengal Authority for Advance Ruling (AAR) has held that the composite supply of services provided for the conversion of wheat into fortified atta (flour) for public distribution shall be exempted from Goods and Services Tax (GST) as the value of Goods involved in the Composite Supply does not exceed 25% of the total value of Supply.
The decision came in response to the clarification sought by Aryan Flour Mills Private Limited, a flour miller, on the applicability of GST on their services provided to the State Government of West Bengal.
The applicant had provided services to the State Government by converting wheat into fortified atta, which is then distributed to the public through the Public Distribution System.
The applicant raised questions about the value of their services and the applicable GST rate highlighting that the wheat remains the property of the State Government throughout the milling process.
The applicant, represented by Mr. Manish Raj argued that their total value of supply included both cash consideration and non-monetary considerations like gunny bags, bran and refraction.
The applicant also raised the issue of Rule 27 under the GST Rules, which governs the determination of the value of supply when consideration is not entirely in money.
The applicant contended that their services should be exempt from GST as the value of goods involved in the composite supply does not exceed 25% of the total value of supply.
The AAR noted that the services provided by the applicant including milling, fortification and packing of wheat into atta constituted a composite supply of goods and services.
The authority also noted that the agreement between the applicant and the State Government revealed that the composite supply was related to a function entrusted to a Panchayat under Article 243G of the Constitution of India.
The authority found that the value of goods in the composite supply did not exceed 25% of the total value of supply.
The AAR concluded that an amount equivalent to the non-monetary consideration, such as the value of gunny bags and by-products, should be included in the total value of supply, as it was known at the time of supply.
The authority referred to a memo issued by the Department of Food & Supplies, Government of West Bengal, which supported their decision and also pointed out that the value of goods in the composite supply was not more than Rs.60 out of a total supply value of Rs.260.48, establishing that it did not exceed 25%.
The authority comprising Tanisha Dutta (CGST Member) and Joyjit Banik (SGST Member) concluded that their composite supply of services for milling wheat into flour for public distribution was eligible for exemption under entry serial no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended. This exemption was granted as the value of goods involved in the composite supply did not exceed 25% of the total value of supply.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
