TaxTMI 
TaxTMI 
2022 (12) TMI 1325
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.... (a) Whether the activity of custom milling of paddy is exempted from the purview of Goods and Service Tax? If it is exempted, in such case, under which exemption notification the same is exempted. 2. Facts of the case:- The applicant is a registered tax payer under Mahasamund Circle engaged in the manufacturing of Rice, Broken Rice, Rice Bran etc. That the applicant, M/s Chopra Trading Company is a partnership firm registered under the relevant provisions of the Indian Partnership Act, 1932. The applicant informed that their firm with an intent to serve the citizens and to assist the government has the primary objective of supplying food grains and rice under the public distribution system envisaged by the State of Chhattisgarh. T....
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....rections issued by the agency of the State Government, i.e, Chhattisgarh State Marketing Co-operative Federation (CG-MARKFED). The officials of MARKFED direct the applicant to collect and procure paddy from assigned warehouses and thereafter once the paddy is converted into rice, the same has to be supplied to assigned warehouses. The whole process involved with the custom milling of rice involving transportation, storage, conversion, packaging, supply, etc. is a time bound process failing which the applicant is imposed huge penalties. v. That for every year applicant enters into an agreement with MARKFED in relation to custom milling of rice. This agreement incorporates the milling capacity, supply period, penalty clauses, dispute resol....
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....centive as consideration for providing such services which is nothing but a nominal charges for doing this service on behalf of the State Government. x. That Section 2 (30) of the CGGST Act defines 'composite supply' as a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. That further, Section 2(90) of the CGGST Act defines 'principal supply' as the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part ....
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....supply provided to the State Government attracted 'NIL rate in accordance with Entry No. 3A of CircularNo.51/25/2018-GST read with Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017. That the activity of custom milling is a binding activity imposed on the applicant by the State Government through an agreement. In fact, the applicant is not allowed to trade rice in the open market without government restrictions and is strictly regulated by the policies of the State Government. Further, the applicant carries out the function of public distribution system which is a function entrusted to a Panchayat under the Constitution of India. Therefore, such an activity is squarely covered under the Entry No. 3A of Circular No. 51/25/20....
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.... engaged for the aforesaid activity on behalf of the government, in lieu of monitory consideration for purely commercial gains. The applicant neither forms a part of public distribution system of the state government nor panchayat body, therefore its activity of custom milling does not comes under entry No. 3A to Notification No, 12/2017- Central Tax (Rate) New Delhi, the 28th June, 2017 as amended vide Notification No. 2/2018- Central Tax (Rate), 25th January, 2018. Accordingly, the claimed benefit of tax exemption, citing reference of Circular No. 51/25/2018-GST dated 31/07/2018 is misplaced and thus we come to the conclusion that the applicants claim of any tax exemption on custom milling of paddy merit rejection. 5.3 In the aforesaid....
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....belonging to another registered person. Further, under Schedule II (para 3) of the CGST Act, any treatment or process which is applied to another person's goods is a supply of service. 3. Milling of paddy is not an intermediate production process in relation to cultivation of plants. It is a process carried out after the process of cultivation is over and paddy has been harvested. Further, processing of paddy into rice is not usually carried out by cultivators but by rice millers. Milling of paddy into rice also changes its essential characteristics. Therefore, milling of paddy into rice cannot be considered as an intermediate production process in relation to cultivation of plants for food, fibre or other similar products or agric....