The West Bengal Authority of Advance Ruling (AAR) has ruled that Goods and Service Tax (GST) exemption is available on milling of food grains for Public Distribution System (PDS) if value of goods does not exceed 25% of supply.

The bench of Dr Tanisha Dutta and Joyjit Banik has observed that the supply of services provided by the applicant company to the State Government is by nature a composite supply of services by way of milling of food grains into flour (atta) to the Government i.e. Food & Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System (PDS) which is by way of an activity in relation to a function entrusted to a Panchayat under article 243G covered by entry in sl. no. 28 of the Eleventh Schedule appended to article 243G of the Constitution of India and where, the value of goods involved in the instant composite supply does not exceed 25% of the value of the composite supply .

The applicant/asseessee, Shree Krishna Roller & Flour Mills is a flour miller, engaged in providing services of crushing wheat provided by the State Government, into fortified atta which in turn is supplied by the State Government through Public Distribution System. The ownership of wheat or atta is never transferred to the applicant.

The applicant sought the advance rulin on the issue in respect of the value of supply of services provided by the applicant company to the State Government?

Yet another issue raised was what is the rate of tax applicable on the value of supply? What components are to be included in calculation of the % of value of goods in the total value of composite supply for the purpose of Notification No. 2/2018- Central Tax (Rate).

Notification No. 2/2018- Central Tax (Rate) dated 25th January, 2018 prescribes Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity 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, as a supply of services which is exempt from GST.

The AAR ruled that the value of supply relating to supply of services provided by the applicant company to the State Government is Rs. 260.48 which comprises the consideration in money as well as non-cash consideration, as discussed.

The AAR held that the supply of services provided by the applicant company to the State Government is by nature a composite supply of services by way of milling of food grains into flour (atta) to Food & Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System and such is eligible for exemption under entry serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the value of goods involved in such composite supply does not exceed 25% of the value of supply.

Ruling Details

Applicant Name: Shree Krishna Roller & Flour Mills

Date: 18/02/2025

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