TaxTMI 
TaxTMI 
2026 (10) TMI 694
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....bed by the West Bengal Authority for Advance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like manner except for certain provisions. Therefore, unless a specific mention is made of such dissimilar provisions, a reference to the CGST Act would also refer to the corresponding provisions in the WBGST Act. Further, for the purposes of these proceedings, the expression "GST Act" means both the CGST Act and the WBGST Act. 1.2 The applicant, Darjeeling Flour Mills Private Limited, is a private limited company registered under the Goods and Services Tax law and is engaged, inter alia, in the business of providing job work services in the nature of crushing and processing of food grains supplied and owned by the Food & Supplies Department, Government of West Bengal. The applicant has entered into an agreement with the District Controller of Food and Supplies, Kalimpong, Government of West Bengal, for carrying out the aforesaid milling activity. Under the a....
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....n the meaning of the Companies Act, 2013 and was incorporated under the provisions of the Companies Act, 1956. The Applicant is a registered person under the GST law and is engaged in the business of selling flour (Atta) and providing job work services in the nature of crushing food grains supplied and owned by the Food & Supplies Department, Government of West Bengal. The Applicant's registered place of business is at 1, Champasari Main Road, Champasari Mallaguri, Darjeeling, West Bengal, 734003. 2.2 The Applicant submits that it entered into an agreement dated 27.09.2018 with the District Controller of Food and Supplies, Kalimpong, Government of West Bengal, for carrying out the aforesaid milling/job work activity. The said agreement has been renewed from time to time, the latest renewal being in February, 2025. Under the said arrangement, the Applicant undertakes the activity of crushing and processing food grains supplied and owned by the Food & Supplies Department, Government of West Bengal, into flour for distribution through the Public Distribution System (PDS). 2.3 The Applicant submits that the Public Distribution System was established for distribution of food a....
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....f empanelment. Paragraph 4(2) provides that an empanelled flour mill shall not indulge in private milling for commercial purposes except with the prior consent of the State Government. 2.6 The Applicant draws attention to Paragraph 20 of the West Bengal Public Distribution System (Empanelment of Flour Mill and Milling of Fortified Atta/Wholemeal Atta) Guidelines, 2017, which provides for maintenance of registers and furnishing of returns. In terms of Paragraph 20(1), a separate register is required to be maintained by the owner of the flour mill to keep records of wheat received, milled and fortified atta/wholemeal atta delivered. Further, under Paragraph 20(2), every owner of a flour mill is required to furnish a fortnightly return to the District Controller (Food and Supplies) containing an abstract of the aforesaid account and a monthly return in the prescribed format. The Applicant has annexed a copy of the said Guidelines as Annexure "P-3". 2.7 The Applicant submits that the activity undertaken by it is directly connected with the Public Distribution System. The Public Distribution System is an activity in relation to the function of safeguarding the interests of weaker ....
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....ing Charges 50 D Transportation & Handling Charges 28.7 E Consideration from sale of Bran (4" Rs.20/Kg (Non-Cash) 80 F Consideration from sale of Refractors (1" Rs.1/kg)(Non-Cash) 1 G Total (A+ B+C+D+E+F) 260.48 H Less: Non-Cash Consideration, I Less: Cost of 2 Gunny Bags -43 J Less: receipt from Sale of Bran and Refractor -81 K Net Total (Cash Consideration) 136.48 The Applicant submits that the total value of the composite supply, taking into account the aforesaid components, is Rs. 260.48, whereas the net cash consideration payable is Rs.136.48 after reduction of the non-cash consideration and the value attributable to the gunny bags and Bran/Refractor. 2.11 The Applicant submits that Notification No. 2/2018-Central Tax (Rate) dated 25.01.2018, issued by the Government of India, Ministry of Finance, Department of Revenue, in exercise of powers conferred by Section 11(1) of the Central Goods and Services Tax Act, 2017, made further amendments to Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 by inserting Serial No. 3A. The Applicant submits that the relevant entry specifically pr....
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....of business since the food grain cannot be transported and supplied in the required manner without proper packing. The Applicant accordingly submits that the transaction constitutes a composite supply of goods and services in which the service of crushing the food grains is the principal supply and the provision of packing materials is ancillary thereto. 2.15 The Applicant submits that the primary condition prescribed under Serial No. 3A is that the value of supply of goods in the composite supply should not constitute more than 25 per cent of the value of the said composite supply. In the instant case, the Applicant considers the value of supply of goods to comprise the Fortification Charges and Packing Charges. Accordingly, the Applicant has calculated the value of supply of goods as follows: Value of Supply of Goods = Fortification Charges + Packing Charges = Rs. (10 + 50) = Rs. 60 The Applicant states that the Value of Composite Supply = Rs. 260.48. Accordingly: Value of supply of goods vis-à-vis value of composite supply = (60 / 260.48) x 100 = 23.03% Thus, according to the Applicant, the value of supply of goods consti....
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....n where the exemption under Serial No. 3A is not available because the value of goods supplied in the composite supply exceeds 25 percent. Paragraph 3.2 of the Circular provides that where the supply of service by way of milling of wheat into flour or paddy into rice is not eligible for exemption under Serial No. 3A on the ground that the value of goods supplied in such composite supply exceeds 25 per cent, the applicable GST rate would be 5 per cent where such composite supply is provided to a registered person, being a job work service covered under Entry No. 26 of Notification No. 11/2017-Central Tax (Rate). 2.20 The Applicant argues that the facts of the present case squarely satisfy the conditions prescribed under Serial No. 3A of Notification No. 12/2017-Central Tax (Rate). The supply is a composite supply involving milling of food grains and supply of packing/fortification materials; the recipient is the Foods & Supplies Department, Government of West Bengal; the resultant flour is distributed through the Public Distribution System; the PDS activity is covered by Entry No. 28 of the Eleventh Schedule to the Constitution; and the value of goods involved in the composite su....
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....n respect of such supply. The Revenue submits that the questions raised by the Applicant are covered under the scope of Section 97(2)(a) and Section 97(2)(b) of the GST Acts, relating to classification of goods or services and applicability of an exemption notification, respectively. 3.2 The Revenue further submits that the issue raised in the instant application has already been considered and decided by this Authority in WBAAR 06 of 2023. According to the Revenue, the facts and grounds involved in the present matter are similar in nature to those considered in the said ruling and, therefore, the view taken by the Authority in WBAAR 06 of 2023 is applicable to the present case as well. 3.3 The Revenue submits that, for determining the value of the composite supply, the consideration received by the supplier is required to be taken into account, including the consideration in money as well as any non-cash consideration, as discussed in WBAAR 06 of 2023. The Revenue accordingly relies upon the valuation principles considered in the said ruling for determining the value of the composite supply of milling of food grains into flour. 3.4 In respect of the first question, the Re....
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....latest renewal being done in the month of February, 2025. The applicant also entered into the same kind of agreement with the District Controller of Food and Supplies, Kalimpong. As per the agreements, the Food & Supplies Department of the Government of West Bengal sends the whole, unpolished food grain to the applicant for crushing and processing into flour. After crushing the whole grains and fortifying the crushed grain with the vitamin the applicant returns the flour packed in the manner as the State Government requires. The packing material is supplied by the applicant. This flour is disturbed through the Public Distribution System (in short PDS) by the State Government. By crushing 100 kilograms of whole wheat, 95 kilograms of flour is produced along with four kilograms of bran and one kilogram of refractor. While the flour is handed over to the Food & Supplies Department, the applicant retains the entire quantity of bran and refractor according to the agreement. The Government pays the applicant Rs.136.48 by cash for crushing the aforesaid quantity of grains. This figure is arrived at as per the following calculation as provided in the communication vide Memo No. 2979(....
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....th supply of packing materials. They are supplied in conjunction with each other in the ordinary course of business as food grain cannot be transported without proper packing. It is, therefore, a composite supply of goods and services where service of crushing food grains is the principal supply and providing packing materials is ancillary to it. According to the applicant, the service is being provided to the Government of West Bengal and the supply is by way of an activity in relation to distribution through Public Distribution System (PDS) which is covered by entry no. 28 of the Eleventh Schedule to Article 243G of the Constitution. The applicant also refers to Circular no. 153/09/2021-GST dated 17.06.2021 issued by TRU wherein it is stated in Paragraph 3.1 that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, said entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods use....
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....y? B) What is the value of the supply here and what is the value of supply of goods and whether it constitutes less than 25% of the total value of supply? C) Whether the supply is by way of activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution? 4.7 According to the submissions made by the applicant's authorised representative and the documents placed before us, the Government of West Bengal is implementing the scheme for providing Fortified Atta/ Wholemeal Atta to the Antyodaya Anna Yojana (in short AAY) and Priority Household (in short PHH) beneficiaries under National Food Security Act (in short NFSA), 2013 through PDS in public interest. Under this scheme some flour mills are empanelled for the purpose of crushing of wheat into whole-meal atta. In this process the empanelled flour mills, as per the agreement signed with the Government, crush the given quantity of wheat allocated by the concerned government department. The flour mills not only crush the wheat, but also fortify it by premixing of micro-nutrients in....
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.... and Government of West Bengal being recipient are noted in Paragraph 4.2. It is evident that both the supplier and the recipient has agreed on a total price of Rs. 260.48 for the supply under consideration and it is the price payable by the Government of West Bengal to the applicant. It is decided that the applicant will retain two gunny bags in which wheat has been sent to him and its value has been determined by the Government at Rs. 43.00 for two gunny bags. The applicant is also entitled to retain the bran and refractor generated in the course of milling of wheat in the ratio of 4:1 i.e. 4 kilograms of bran and 1 kilogram of refractor generated during the crushing of 100 kilograms of wheat. The price of such bran and refractor has been determined at Rs. 81.00 for the entire quantity. The price for the retained goods has been specified as 'non-cash consideration' in the memo ibid and has been deducted from the total price payable by the Government. Here we subscribe to the view adopted by the West Bengal Appellate Authority for Advance Ruling in Appeal Case No. 02/WBAAAR/APPEAL/2022 in respect of M/s Shiv Flour Mill. The Appellate Authority observed as under: "The W....
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....y of activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. Entry no. 28 of the Eleventh Schedule appended to Article 243G of the Constitution of India as available in the official website of Legislative Department, Ministry of Law and Justice, Government of India (https://legislative.gov.in) refers to 'Public distribution system'. If we carefully follow the description of serial no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, from time to time, it refers to a supply by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. The phrase 'by way of any activity' has in fact widened the scope of this entry. For example, it not only refers to Public Distribution System (in short PDS), it also refers to activities which are related to PDS directly or indirectly. From the documents placed before us it appears that the atta produced by the applicant will reac....