GST Authority: FRK Supply Not Eligible for Concessional Rate Pre-Sept 30, 2021; New Rules Apply Post-Oct 1, 2021

The Authority ruled that Notification No. 39/2017-CT(R) was not applicable to the applicant's supply of Fortified Rice Kernels (FRK) up to September 30, 2021, as FRK did not meet the criteria for concessional GST rate under the notification. However, post-October 1, 2021, the amended Notification No. 39/2017-CT(R), as per Notification No. 11/2021-C.T.(Rate), applied to the supply of FRK (Premix) by the applicant, subject to fulfilling specified conditions for the concessional GST rate.

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Issues Involved:
1. Classification of Fortified Rice Kernels (FRK) under GST.
2. Applicability of Notification No. 39/2017-CT(R) dated 18.10.2017.
3. Conditions for concessional GST rate on FRK.
4. Impact of Notification No. 11/2021-C.T.(Rate) dated 30.09.2021.

Detailed Analysis:

1. Classification of Fortified Rice Kernels (FRK) under GST:
The applicant contended that FRK falls under Chapter 19 of the Customs Tariff Act, specifically under Tariff Item 1904, which deals with "Prepared foods obtained by the swelling or roasting of cereals or cereal products." The applicant supported this classification with a test report from Nawal Analytical Laboratories certifying the ash and starch content of FRK. The applicant argued that FRK is not a product of the milling industry and should not be classified under Chapter 11, which deals with "Products of the milling industry."

2. Applicability of Notification No. 39/2017-CT(R) dated 18.10.2017:
The applicant sought a ruling on whether Notification No. 39/2017-CT(R) applies to their activity of manufacturing and supplying FRK to the Tamil Nadu Civil Supplies Corporation under the Pilot Scheme for "Fortification of Rice & its Distribution under the Public Distribution System." The notification prescribes a concessional GST rate of 5% (2.5% CGST + 2.5% SGST) for food preparations put up in unit containers and intended for free distribution to economically weaker sections of society under a government-approved program.

3. Conditions for Concessional GST Rate on FRK:
The notification requires that the supplier produces a certificate from an officer not below the rank of Deputy Secretary to the Government of India or the State Government, certifying that the food preparations have been distributed free to economically weaker sections. The applicant argued that their supply of FRK meets these conditions as it is intended for free distribution under a government-approved scheme.

4. Impact of Notification No. 11/2021-C.T.(Rate) dated 30.09.2021:
Effective from 01.10.2021, this notification amended Notification No. 39/2017-CT(R) to include "Fortified Rice Kernel (Premix) supply for ICDS or similar scheme duly approved by the Central Government or any State Government." The amendment also changed the wording from "food preparations" to "goods," implying that FRK (Premix) is now explicitly covered under the concessional GST rate.

Judgment:

Pre-01.10.2021 Period:
The Authority ruled that Notification No. 39/2017-CT(R) is not applicable to the applicant's supply of FRK for the period up to 30.09.2021. The reasons are:
1. FRK is not a food preparation put up in unit containers for free distribution to economically weaker sections.
2. The applicant is not directly involved in the free distribution of FRK to economically weaker sections.

Post-01.10.2021 Period:
The Authority ruled that Notification No. 39/2017-CT(R), as amended by Notification No. 11/2021-C.T.(Rate), is applicable to the supply of FRK (Premix) by the applicant from 01.10.2021 onwards. The conditions stipulated under Column (4) of the amended notification must be fulfilled for the concessional GST rate to apply.

Ruling:
1. Pre-01.10.2021: Notification No. 39/2017-CT(R) is not applicable to the applicant's activity of manufacturing and supplying FRK to the rice mills designated by Tamil Nadu Civil Supplies Corporation for the reasons stated above.
2. Post-01.10.2021: Notification No. 39/2017-CT(R), as amended by Notification No. 11/2021-C.T.(Rate), is applicable to the supply of FRK (Premix) by the applicant for the Pilot Scheme on "Fortification of Rice & its Distribution under the Public Distribution System," subject to the fulfillment of the conditions stipulated under Column (4) of the said Notification.

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