2023 (7) TMI 243 - AAR - GST

Fair price shop's subsidized kerosene supply to ration card holders doesn't qualify for GST exemption under Notification 12/2017

In Re: Chanchal Saha

AAR, West Bengal ruled that a fair price shop's supply of subsidized kerosene to ration card holders does not qualify for GST exemption under entry 11A of ... Exemption from GST - Fair Price Shop - Supply of goods or services to ration card holder on behalf of the Government - applicant is supplying services to the State Government or not - applicant receives consideration in the form of commission or margin or not. Applicability of Nil rate of tax under entry 11A of the Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 (as amended). Fair price shop or not - HELD THAT:- Fair Price Shop is licensed by the Government for distribution of essential commodities to the ration card holders. During the personal hearing, the applicant had presented the license, issued to it by the West Bengal State Government, for a dealer issued under the West Bengal Kerosene Control Order, 1968 which has been renewed from time to time. This license authorizes the applicant to carry out business as a dealer of kerosene from his shop, and make purchases of kerosene from a licensed dealer subject to any limits imposed by law - the applicant is a ‘Fair price shop’ for the purpose of entry 11A of the Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 (as amended). Consideration in the form of commission or margin - HELD THAT:- The applicant receives consideration from the ration card holders against sale of S.K. Oil at the price mentioned in the price schedule - In the table mentioned in this price schedule, the entries 10-14 mention the difference between the purchase price and sale price wherefrom it appears that the sale price i.e., the consideration against which the applicant supplies S.K. Oil to the ration card holders comprises inter alia of ‘Dealer’s Commission’. Supply of services to the State Government - HELD THAT:- The recipient would be a person who is liable to pay consideration for the supply of goods or services. In this case, the person liable to pay the consideration is the ration card holder, and is thus the recipient of the supply. The supply is of S.K. Oil and the recipients are the ration card holders. Consequently, this supply is in the nature of supply of goods to the ration card holders. In the instant case, there is no supply made by the applicant to the Government and that the ration card holders are the recipient of the supply. The applicant has made various submissions arguing that they are making supply of services to the State Government by way of working as an agent of the Government for distributing S.K. Oil to the ration card holders identified by the Government - the applicant is making supply to the ration card holders and not to the State Government. Thus the entry 11A of the Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 (as amended) is not applicable in this case. Further, the supply to the ration card holders is of goods namely, kerosene oil, i.e., S.K. Oil, for which the consideration is paid by these recipients. Issues Involved:1. Liability to charge GST from the State Government for supply made by a Fair Price Shop.2. GST applicability on other charges like Dealer's commission, Dealer's Transport Charges, Stationery Charges, H & E Loss.3. Classification of the supply of 'S.K. Oil' along with charges as a composite supply.Summary:Issue 1: Liability to Charge GST from the State GovernmentThe applicant, a Fair Price Shop licensed under the West Bengal Kerosene Control Order, 1968, sought clarification on whether GST should be charged from the State Government for supplies made. The Authority ruled that the applicant is not making any supply to the State Government. The supply is made to ration card holders, who pay the consideration. Therefore, no tax is to be charged to the State Government.Issue 2: GST Applicability on Other ChargesThe applicant questioned whether charges such as Dealer's commission, Dealer's Transport Charges, Stationery Charges, and H & E Loss are liable to GST or exempt. The Authority concluded that these charges form part of the value of supply of S.K. Oil and are subject to GST as per Section 15 of the GST Act.Issue 3: Classification as Composite SupplyThe applicant inquired if the supply of 'S.K. Oil' along with other charges constitutes a composite supply with S.K. Oil as the principal supply. The Authority determined that the supply is not a composite supply but a single supply of goods (S.K. Oil) to ration card holders. Other charges are incidental expenses included in the value of supply, as per clause (c) of sub-section (2) of section 15 of the GST Act.Ruling:1. The applicant is not making any supply to the State Government; hence, no GST is to be charged to the State Government.2. GST is applicable on other charges like Dealer's commission, Dealer's Transport Charges, Stationery Charges, and H & E Loss.3. The supply of S.K. Oil along with other charges is not a composite supply; other charges form part of the value of supply.