Services of Milling Atta to Food & Supplies Department Eligible for Central Tax (Rate) Exemption as Value of Goods does not Exceed 25% of Value of Supply: AAR [Read Order]

The West Bengal Authority for Advance Ruling (AAR) observed that services of milling atta to Food & Supplies Department eligible for Central Tax (Rate) exemption as value of goods does not exceed 25% of value of supply.

The Applicant, Baba Lokenath Flour Mills Private Limited, is a flour miller, engaged in providing services of crushing wheat provided by the State Government, into fortified atta which in turn is supplied by the State Government through Public Distribution System. The ownership of wheat or atta is never transferred to the Applicant.

The applicant has entered into a contract with the Governor of the State of West Bengal represented by the District Controller of Food & Supplies (State Government) for conversion of wheat provided by the State Government and owned by the State Government, at all times, into atta/ fortified atta, for distribution by the State Government through Public Distribution System (PDS), as entrusted under the Eleventh Schedule of the Constitution of India.

The issue involved in the instant case, as we find, is to determine whether the instant supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended vide Notification No. 2/2018- Central Tax (Rate) dated 25.01.2018) or the same shall be taxable at 5% as clarified in para 3.2 of the Circular No. 153/09/2021-GST dated 17.06.2021 issued by the Central Board of Indirect Taxes and Customs (CBIC).

Circular No. 153/09/2021-GST dated the 17th June, 2021 on the subject GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS, states that In case the supply of service by way of milling of wheat into flour or of paddy into rice, is not eligible for exemption under Sl. No. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 for the reason that value of goods supply in such a composite supply exceeds 25%, then the applicable GST rate would be 5%.

A Two-Member Bench of the Authority comprising Sarthak Saxena, Joint Commissioner, CGST & CX and Joyjit Banik, Senior Joint Commissioner, SGST observed that “In the instant case, value of supply shall be the consideration in money as well as non-cash consideration, as discussed. This 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 entry 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.”

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