The West Bengal Authority for Advance Ruling (AAR) has held that Instant composite supply of service of milling of food grains into flour to Food and Supplies Department, Govt. of West Bengal attracts Nil GST.
The applicant, Himalayan Flour Private Limited has entered into an agreement with the District Controller of Food and Supplies, Government of West Bengal for supply of fortified wholemeal atta. According to the said agreement, the State Govt. (Food & Supplies Department) sends the whole, unpolished food grain to the applicant for crushing and processing it into flour. The applicant returns the flour(atta) packed in the manner as the State Govt. requires by fortifying the crushed grain with the vitamin which is then distributed through the Public Distribution System (PDS) by the State Govt on behalf of Food and Supplies Department, Govt of West Bengal.
The applicant has submitted that the Department of Food and Supplies, Government of West Bengal has issued memo no. 569(3)-FS/Sectt./Food/4P-02/2016/2021 dated 18th February 2022 wherein the Government has explained the full process of crushing of wheat into Fortified Atta for Public Distribution System. After considering both the cash and noncash consideration, it came to the conclusion that maximum value of involvement of goods is less than 25% of the total value of composite supply. Therefore, it was provided that the said process would qualify for exemption as per entry no. 3A of Notification no. 12/2017-CT (Rate) read with State Notification no. 1136-FT dated 28th June 2017.
The Bench consisting of Brajesh Kumar Singh and Joyjit Banik observed that “The value of goods involved in the instant composite supply thus found to be 21.52% of the total value of supply and thus constitutes not more than 25 percent of the value of the composite supply We, therefore, hold that the instant 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 since the supply satisfies all the conditions specified in the said entry.”
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