Order Date – 09 February 2023

Facts –

• The Applicant, M/s Somnath Flour Mills Private Limited, is a flour miller. The applicant has entered into an agreement with the State of West Bengal represented by the District Controller of Food & Supplies for conversion of wheat provided by the State Government and owned by the State Government, into atta/ fortified atta, for distribution by the State Government through Public Distribution System.

Issue – 

• Whether the supply shall qualify as an exempt supply vide entry no. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017?

Order –

• The AAR held that the activities undertaken 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.
• 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 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.