Fortified Rice Kernels manufacturer denied 5% concessional tax rate under Notification 39/2017 for indirect supply

AAR Uttarakhand ruled that the applicant manufacturing Fortified Rice Kernels (Premix) was not eligible for concessional 5% tax rate under Notification 39/2017 CT (R). The Authority held that since the applicant supplied FRK to rice millers rather than directly to government agencies for ICDS or similar approved schemes, they did not meet the exemption criteria. The notification requires direct supply for approved government distribution programs to economically weaker sections, which the applicant failed to establish.

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Issues Involved:
1. Eligibility for concessional rate of tax of 5% under exemption notification no. 39/2017 CT (R) for the supply of Fortified Rice Kernels (FRK).

Detailed Analysis:

Issue: Eligibility for Concessional Rate of Tax of 5%

Application and Context:
The applicant, M/s AS Bharat Refinery (India) Private Limited, engaged in the manufacturing of Fortified Rice Kernels (FRK), sought an advance ruling to determine if they are eligible for a concessional tax rate of 5% under the amended Notification No. 39/2017-CT (R) dated 18.10.2017. The applicant argued that they supply FRK to rice mills for further distribution under the Public Distribution Schemes (PDS) as instructed by the Government of Uttarakhand.

Legal Framework:
The application was filed under Section 97 of the Central Goods & Service Tax Act, 2017 and Uttarakhand State Goods & Service Tax Act, 2017. The relevant notification, No. 39/2017-CT (R), specifies a concessional tax rate of 5% for FRK supplied for ICDS or similar schemes approved by the Central or State Government, subject to certain conditions.

Conditions for Concessional Rate:
The notification mandates that the supplier must produce a certificate from an officer not below the rank of Deputy Secretary to the Government, confirming that the goods have been distributed free to economically weaker sections under an approved program, within five months from the date of supply.

Applicant's Argument:
The applicant contended that their supply of FRK to various rice mills is for the purpose of the PDS scheme approved by the Central and Uttarakhand Governments, thus qualifying for the concessional tax rate.

Authority's Examination:
The authority examined the notification and emphasized that the concessional rate applies only if the goods are supplied directly for ICDS or similar schemes and the supplier is aware beforehand that the goods are intended for such schemes. The notification's condition requires the supplier to ensure that the goods are distributed free to economically weaker sections and to produce the necessary certificate.

Findings:
The authority found that the applicant supplies FRK to rice millers, who then supply the fortified rice to agencies responsible for free distribution. The applicant does not directly supply the goods for free distribution under an approved program, nor do they produce the required certificate. Therefore, the applicant does not meet the pre-supply and post-supply conditions stipulated in the notification.

Comparison with Other Rulings:
The applicant cited a ruling in the case of M/s Rasi Nutri Foods, where the concessional rate was granted. However, the authority noted that in that case, the supply was made directly to the Tamil Nadu Civil Supplies Corporation, which was responsible for distribution under the PDS, unlike the present case where the applicant supplies to intermediaries (rice millers).

Conclusion:
The authority concluded that the applicant is not eligible for the concessional tax rate of 5% under the exemption Notification No. 39/2017-CT (R) dated 18.10.2017, as they do not fulfill the required conditions.

Ruling:
The applicant is not eligible for the concessional rate of tax of 5% under the exemption Notification No. 39/2017-Central Tax (Rate) dated 18.10.2017.

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