Composite Supply of Services of Milling Food Grains into Atta for Food & Supplies Department Exceeding 25% Value of Supply attracts 5% GST: AAR [Read Order]

The West Bengal Authority for Advance Ruling (AAR) ruled that composite supply of services of milling food grains into Atta for Food & Supplies Department exceeding 25% value of supply attracts 5% GST.

The applicant, M/s. Vikash Agritech Food Private Limited is stated to be engaged in the business of selling flour (atta) and providing service of job work in the nature of crushing food grains supplied and owned by Food & Supplies Department, Government of West Bengal. The applicant submitted that he has entered into an agreement with the District Controller of Food and Supplies, Kolkata, Government of West Bengal for supply of fortified Wholemeal Atta.

The applicant has sought advance ruling on whether the instant composite supply of service by way of milling of food grains into flour to Food & Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and what shall be rate of GST on such milling, if it does not fall under entry No. 3A.

The applicant has contended that services in the nature of crushing food grains supplied and owned by Food & Supplies Department, Govt. of West Bengal is exempt from the levy of GST vide sl. no. 3A of the notification No. 12/2017- CT (R) dated 28.06.2017. 2.9 The applicant has argued further that the flour is packed in the packing material procured by him and thus he is making a bundled supply of the services of crushing of the grains along with supply of packing materials.

The applicant submitted that they are supplied in conjunction with each other in the ordinary course of business as food grain cannot be transported without proper packing. It is, therefore, a composite supply of goods and services where service of crushing food grains is the principal supply and providing packing materials is ancillary to it.

A Two-Member Bench of the Tribunal comprising Sarthak Saxena, Joint Commissioner, CGST & CX and Joyjit Banik, Senior Joint Commissioner, SGST observed that “The instant composite 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 value of goods involved in such composite supply does not exceed 25% of the value of supply. “

“In case the value of goods involved in such composite supply exceeds 25% of the value of supply, the supply shall attract tax @ 5% (CGST @ 2.5% + WBGST @ 2.5%) vide entry serial No. 26 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 [corresponding State Tax Notification No. 1135-FT dated 28.06.2017], as amended” the Tribunal noted.

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