Ruling on GST Exemption for Milling Food Grains into Flour under Notification 12/2017-Central Tax

The case involved the eligibility for GST exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) for milling food grains into flour. The ruling determined that the composite supply of milling food grains into flour for the Food & Supplies Department is eligible for GST exemption under entry No. 3A if the value of goods does not exceed 25% of the total value. If the value of goods exceeds 25%, the supply will be taxed at 5% (CGST @ 2.5% + WBGST @ 2.5%).

---

---

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

Issue-wise Detailed Analysis:

1. Eligibility for GST Exemption:
The applicant entered into an agreement with the Government of West Bengal for milling food grains into fortified Wholemeal Atta. The primary question was whether this composite supply of service qualifies for GST exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate).

Composite Supply Analysis:
- Definition and Nature: The supply involves milling wheat into flour, fortifying it, and packing it. This qualifies as a composite supply under Section 2(30) of the GST Act, where milling is the principal supply.
- Constitutional Function: The activity relates to Public Distribution System (PDS), which is a function entrusted to Panchayats under Article 243G of the Constitution.
- Value of Supply: The value of the composite supply includes both cash and non-cash considerations. The non-cash consideration includes the sale of by-products like bran and refractor and the retention of gunny bags.

Value Calculation:
- Cash Consideration: Rs. 136.48
- Non-Cash Consideration: Rs. 124 (Rs. 81 from bran and refractor + Rs. 43 from gunny bags)
- Total Value: Rs. 260.48
- Goods Component: Rs. 60 (fortification and packing charges)
- Percentage of Goods Component: 23.03% of the total value, which is less than the 25% threshold specified in entry No. 3A.

Conclusion on Exemption:
The composite supply qualifies for exemption under entry No. 3A if the value of goods does not exceed 25% of the total value. The applicant's supply meets this condition based on the provided calculations.

2. Applicable GST Rate if Exemption Not Applicable:
If the value of goods exceeds 25% of the composite supply:
- The supply will attract a GST rate of 5% (CGST @ 2.5% + WBGST @ 2.5%) as per entry No. 26 of Notification No. 11/2017-Central Tax (Rate).

Observations:
- Revenue Submission: The revenue officer agreed that the exemption might apply if the goods component does not exceed 25%, but this needs case-by-case verification.
- Documentary Evidence: The applicant did not provide documents supporting the non-cash consideration, making it difficult to conclusively determine the value of the goods component.

Ruling:
1. The composite supply of milling food grains into flour for the Food & Supplies Department is eligible for GST exemption under entry No. 3A if the value of goods does not exceed 25% of the total value.
2. If the value of goods exceeds 25%, the supply will be taxed at 5% (CGST @ 2.5% + WBGST @ 2.5%).

Validity:
This ruling is subject to the provisions under Section 103 and may be declared void under Section 104(1) of the GST Act.

---