2025 (3) TMI 158 - AAR - GST

Company's wheat milling services for Public Distribution System qualify for GST exemption under Notification 12/2017

In Re: M/s. Shree Krishna Roller & Flour Mills

In Re: M/s. Shree Krishna Roller & Flour Mills - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:(i) What is the value of supply of services provided by the applicant company to the State GovernmentRs.(ii) What is the rate of tax applicable on the value of supplyRs. What components are to be included in the calculation of the percentage of value of goods in the total value of composite supply for the purpose of Notification No. 2/2018-Central Tax (Rate)Rs.2. ISSUE-WISE DETAILED ANALYSISIssue (i): Value of Supply of Services- Relevant Legal Framework and Precedents: The determination of the value of supply is governed by Section 15 of the GST Act, which states that the value of a supply of goods or services shall be the transaction value, which is the price actually paid or payable for the said supply. Rule 27 of the GST Rules is applicable when the consideration is not wholly in money.- Court's Interpretation and Reasoning: The Court considered both monetary and non-monetary considerations in determining the value of supply. The total value of supply was calculated as Rs. 260.48, which includes Rs. 136.48 in cash consideration and Rs. 124.00 in non-cash consideration.- Key Evidence and Findings: The applicant receives Rs. 136.48 per quintal from the State Government after deducting Rs. 43 for two gunny bags. Non-cash considerations include the retention of bran and refraction, valued at Rs. 81, and gunny bags valued at Rs. 43.- Application of Law to Facts: The Court applied Rule 27(b) of the GST Rules to include both cash and non-cash considerations in the value of supply.- Treatment of Competing Arguments: The applicant argued that the price is not the sole consideration, and the Court agreed, considering both cash and non-cash elements.- Conclusions: The value of supply is Rs. 260.48, comprising both monetary and non-monetary considerations.Issue (ii): Rate of Tax and Components for Calculation- Relevant Legal Framework and Precedents: Notification No. 2/2018-Central Tax (Rate) and Entry No. 3A of Notification No. 12/2017-Central Tax (Rate) provide exemptions for composite supplies where the value of goods does not exceed 25% of the total value.- Court's Interpretation and Reasoning: The Court examined whether the supply qualifies as a composite supply under the GST Act and whether it relates to functions entrusted to a Panchayat under Article 243G of the Constitution.- Key Evidence and Findings: The supply involves milling wheat into fortified atta, which is a composite supply. The value of goods (fortification and packing materials) is Rs. 60, which is 23.03% of the total supply value.- Application of Law to Facts: The Court found that the supply qualifies for exemption as the value of goods does not exceed 25% of the total value.- Treatment of Competing Arguments: The Revenue argued that the value of goods exceeds 25%, but the Court did not find sufficient evidence to support this claim.- Conclusions: The supply is exempt from GST under Entry No. 3A as the value of goods does not exceed 25% of the composite supply.3. SIGNIFICANT HOLDINGS- Preserve Verbatim Quotes of Crucial Legal Reasoning: 'The value of goods involved in the instant composite supply stands at = 60/260.48 x 100 = 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply.'- Core Principles Established: The determination of supply value must consider both monetary and non-monetary considerations. The exemption under Entry No. 3A applies if the value of goods in a composite supply does not exceed 25% of the total value.- Final Determinations on Each Issue: The value of supply is Rs. 260.48, and the supply is exempt from GST as it qualifies under Entry No. 3A of Notification No. 12/2017-Central Tax (Rate).