Taxability ruling on supplying red gram dall under job work and packing charges.

The case involved determining the taxability of supplying red gram dall under a job work arrangement and the taxability of packing charges for red gram dall. The authority ruled that the supply of red gram dall was considered job work subject to a 5% GST rate. Additionally, the packing charges for red gram dall were deemed taxable at the same 5% rate as they were ancillary to the principal supply of custom milling.

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Issues Involved:
1. Taxability of supply of red gram dall under barter system.
2. Taxability of packing charges for red gram dall.

Detailed Analysis:

Issue 1: Taxability of Supply of Red Gram Dall under Barter System

The applicant, engaged in the business of pulses and dalls, received a work order from the Andhra Pradesh State Civil Supplies Corporation to convert red gram whole into red gram dall and supply it. The applicant contended that the transaction was a barter system, where they supplied red gram dall in exchange for red gram whole, and hence, it should not attract GST.

Upon examining the facts, the authority noted that the applicant was appointed as a "miller cum transporter" for converting red gram whole into red gram dall at a specified outturn ratio. The authority clarified that the transaction was not a barter system but a job work. The work order and the applicant’s role as a miller cum transporter indicated that the activity was custom milling, which is considered job work under GST laws.

The authority referred to the Government of India’s clarification regarding milling of paddy, which stated that milling is not an intermediate production process related to cultivation but a separate process carried out by millers, changing the essential characteristics of the product. Thus, milling of red gram into red gram dall falls under job work and is subject to GST.

The relevant GST rate for job work related to food products, including milling of pulses, is 5% under Serial No.26 Heading 9988 (i) (f) of Notification No.11/2017 Central Tax Rate dated 28.06.2017, as amended.

Issue 2: Taxability of Packing Charges for Red Gram Dall

The applicant received packing charges for packing 1 kg of red gram dall. The applicant argued that since there was no separate contract for packing, and it was incidental to the main supply of red gram dall, the packing charges should not attract GST.

The authority examined the contract and noted that the packing charges were ancillary to the main supply of milling and transportation of red gram dall. According to Section 2(30) of the CGST Act 2017, this constitutes a composite supply, where the principal supply is the custom milling of red gram.

As per Section 8(a) of the CGST Act, the tax liability on a composite supply is determined by the principal supply's tax rate. Since the principal supply (milling) is taxable at 5%, the packing charges, being part of the composite supply, are also taxable at the same rate.

Ruling:

1. The transaction of supplying red gram dall in exchange for red gram whole is considered job work and attracts a 5% tax rate under Serial No.26 Heading 9988 (i) (f) of Notification No.11/2017 Central Tax Rate dated 28.06.2017, as amended.
2. The packing charges of Rs. 4.50 per kg received by the applicant for packing red gram dall are taxable.

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