Order Date – 26 June 2023

Facts –

• The Applicant, Haldia Agro Private Limited, 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.

Issue – 

• Whether the supply qualifies as composite supply, whether the same is made by way of any activity in relation to any function entrusted to a Panchayat under article 243G or 243W of the Constitution of India?

Order –

• The AAR observed that the activities undertaken by them for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of “composite supply‟ under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply.
• Para 3.1 of the Circular No. 153/09/2021-GST dated 17.06.2021 where it is stated 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, the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution.
• It was found that in the instant case, the applicant receives Rs.10/- and Rs. 50/- i.e., Rs. 60/- in total against fortification cost and packing charges respectively for crushing of 100 kgs of wheat which involves supply of goods. Further the total value of supply to be Rs.260.48 out of which Rs.136.48 is the cash consideration and Rs.124 is the non-cash consideration. The value of goods involved in the instant supply stands at Rs.60/- against total value of supply of Rs. 260.48, thereby the value of goods involved in the instant composite supply stands at 23.03% of the total value of supply i.e., it does not exceed 25% of the value of the composite supply.
• Hence it was held that the instant 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 is eligible for exemption under serial no. 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, since the supply satisfies all the conditions specified in the said entry.

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