The West Bengal Authority for Advance Ruling (AAR) held that the composite supply of crushing the food grains belonging to the State Government and delivery of the crushed grains will be exempted as provided the proportion of the packing materials in the composite supply in value terms does not exceed 25%.
The Applicant intends to supply to the State Government the service of crushing food grains. The Government will send to the Applicant the whole, unpolished food grain for processing. The Applicant will return the grain after crushing. The processed food grain will be used for distribution through the Public Distribution System (hereinafter PDS).
The Applicant seeks a ruling whether the above activity is exempt under Sl No. 3 or 3A of Notification No 1212017 CT (Rate) dated 2810612017 (corresponding State Notification No.1136 – FT dated 281OG12017), as amended (hereinafter collectively called the Exemption Notification). The question is admissible under section 97(2) (b) of the GST Act.
The Applicant is unregistered under the GST Act. Being unregistered, neither the Central nor the State tax administrations exercise ascertained administrative jurisdiction on the Applicant.
The bench comprising of two members Susmitha Bhattacharya and Parthasarathi Dey delivered the order based on a petition.
Section 98T (1) of the GST Act elaborates as these functions are in the nature of public welfare service that the governments on their own, and sometimes through governmental authorities/entities, do provide to the citizens. When the activity is in relation to any such function, the supply to the governments or governmental authorities/entities or local authorities is exempt from paying GST under Sl No. 3 or 34 of the Exemption Notification, provided it is either a pure service or a composite supply, where supply of goods does not constitute more than 25% of the value.
The Authority observed that the Service Tax exempts “services provided to the Government, a local authority or a governmental authority by way of water supply, public health, sanitation, conservancy, solid waste management or slum improvement and up-gradation.”
The bench further observed that the Applicant’s supply can be related to distribution through PDS, which is covered under Entry No. 28 of the Eleventh Schedule of the Constitution. lt will be an activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution, and its supply to the State Government should be exempt under Sl No. 3A of the Exemption Notification, provided the proportion of the packing materials in the composite supply in value terms does not exceed 25%.
Subscribe Taxscan Premium to view the Judgment
