GST Exemption for Milling Food Grains: Key Thresholds & Rates

The composite supply of milling food grains into flour for the Food & Supplies Department is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) provided the value of goods does not exceed 25% of the total supply value. If the value of goods surpasses 25%, the supply will be subject to a 5% GST rate (CGST @ 2.5% + WBGST @ 2.5%) under entry No. 26 of Notification No. 11/2017-Central Tax (Rate).

---

---

Issues Involved:
1. Eligibility for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 for composite supply of milling food grains into flour for Public Distribution System.
2. Applicable GST rate if the supply does not qualify for the exemption under entry No. 3A.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption under Entry No. 3A:

The applicant, engaged in milling food grains into flour for the Food & Supplies Department, Government of West Bengal, sought clarity on whether this composite supply is exempt under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

- Composite Supply: The applicant’s activities, including milling wheat into fortified atta, packing, and fortification, qualify as a "composite supply" under clause (30) of section 2 of the GST Act. The principal supply is the service of milling, with ancillary supplies being fortification and packing.

- Function Entrusted to Panchayat/Municipality: The supply is in relation to a function entrusted to a Panchayat under article 243G of the Constitution, specifically public distribution, which is listed in entry 28 of the 11th Schedule to the Constitution.

- Value of Goods in Composite Supply: The key condition for exemption under entry No. 3A is that the value of goods in the composite supply should not exceed 25% of the total value. The applicant provided a breakdown showing that the value of goods (fortification and packing charges) is Rs. 60 out of a total value of Rs. 260.48, which is 23.03%, thus meeting this condition.

However, the applicant did not furnish documents supporting non-cash considerations (sale of bran, refractor, and gunny bags). Without these, the authority could not conclusively determine if the value of goods exceeds 25%.

2. Applicable GST Rate if Exemption Does Not Apply:

If the value of goods exceeds 25% of the composite supply, the supply would not qualify for the exemption under entry No. 3A. In such cases, the applicable GST rate would be 5% (CGST @ 2.5% + WBGST @ 2.5%) as per entry No. 26 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which pertains to job work services for food and food products.

Ruling:

1. The composite supply of milling food grains into flour for the Food & Supplies Department is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, provided the value of goods does not exceed 25% of the total value of supply.

2. If the value of goods exceeds 25%, the supply will attract a GST rate of 5% (CGST @ 2.5% + WBGST @ 2.5%) under entry No. 26 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

This ruling is valid subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.

---