GST
on milling of wheat into flour or paddy into rice for distribution by State
Governments under PDS
The Goods and Services Tax Act, 2017 came into force in
In case the supply of service by way of milling of wheat
into flour or of paddy into rice, is not eligible for exemption under Sl. No. 3
A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 for the
reason that value of goods supply in such a composite supply exceeds 25%, then
the applicable GST rate would be 5% if such composite supply is provided to a
registered person, being a job work service (entry No. 26 of notification No.
11/2017- Central Tax (Rate) dated 28.06.2017). Combined reading of the
definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51] makes
it clear that a person registered only for the purpose of deduction of tax
under section 51 of the CGST Act is also a registered person for the purposes
of the said entry No. 26, and thus said supply to such person is also entitled
for 5% rate.
The relevant Circular is given below for ready reference:
To,
CBIC-190354/36/2021-TRU
Section-CBEC
Government of
India Ministry of Finance
Department of Revenue
****
North Block, New Delhi,
Dated the 17th June, 2021
The Principal Chief
Commissioners/
Chief Commissioners/
Principal
Commissioners/ Commissioner
of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Sub: GST on milling of wheat into flour or paddy into rice for distribution
by State Governments under
PDS –reg.
Certain representations have
been received seeking clarification whether composite supply of
service by way of milling of
wheat into wheat flour, alongwith fortification, by any person to a State Government for distribution of such wheat flour under Public Distribution
System is eligible for exemption
under entry No. 3A of Notification No. 12/2017-Central Tax (Rate)
dated 28.06.2017, and also as regards the rate of GST on such milling, if it does not fall in said entry No. 3A.
The issue has been examined
by
GST Council in its 43rd meeting held on 28th May, 2021.
2. Entry
at Sl.
No.
3A
of Notification No. 12/2017-Central Tax (Rate) dated
28.06.2017 exempts
“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”.
3. As per the recommendation of the GST Council
the issue is clarified as below.
3.1 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 used for
fortification, packing material etc) does not exceed 25% of
the
value of composite supply. It is a matter of fact as to whether
the value of goods in such composite supply
is
up to 25% and requires ascertainment on
case-to-case basis.
3.2 In case the supply of service by way of milling of wheat into flour or of paddy
into rice, is not eligible for exemption
under Sl. No. 3 A of Notification
No. 12/2017- Central Tax (Rate) dated 28.06.2017 for the reason that value of
goods supply in such a composite supply exceeds 25%, then the applicable GST
rate would
be 5% if such composite supply is provided to a registered person, being a job work service (entry
No. 26 of notification No. 11/2017- Central
Tax (Rate) dated 28.06.2017). Combined
reading of the definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51]
makes it clear that a person registered only for the purpose
of deduction
of tax under section 51 of the CGST Act is also a registered person for the purposes of the said entry
No. 26, and thus said supply
to
such person is also entitled for 5%
rate.
4. Difficulty if any, in the implementation of this circular may be brought to the notice
of the Board.
Yours Faithfully, Shashikant Mehta
Technical
Officer (TRU)
Email: shashikant.mehta@gov.in