2026-VIL-174-AAR
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SGST Advance Ruling Authority

GST - Exemption under Serial No. 3A of Notification No. 12/2017-Central Tax (Rate) to composite supply of milling of food grains for distribution under Public Distribution System - Applicant was engaged in job work of crushing, fortifying and packing food grains supplied and owned by the State Government Food and Supplies Department into flour for distribution through the PDS, receiving cash consideration and non-cash consideration in the form of retention of bran, refractors and gunny bags - Whether the composite supply of service by way of milling of food grains into flour to the State Government for distribution under the Public Distribution System is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) - HELD - The supply is a composite supply in which milling is the principal supply, while fortification and packaging are ancillary supplies bundled with it and supplied in conjunction with each other in the ordinary course of business. The value of supply is the transaction value, being the price agreed between the supplier and the recipient, which includes the notional value of the non-cash consideration retained by the Applicant irrespective of the actual price realised on its disposal - The value of goods, being the fortification and packing charges, constitutes less than 25% of the total value of supply. The phrase 'by way of any activity' widens the scope of entry 3A, so that activities related directly or indirectly to the PDS, which figures in the Eleventh Schedule under Article 243G of the Constitution, are covered, and the flour reaches the beneficiaries through that system. Relying on Circular No. 153/09/2021-GST, which requires case-to-case ascertainment of whether the value of goods is up to 25%, the supply fulfils all conditions of entry 3A - The composite supply is eligible for exemption so long as the value of goods does not exceed the threshold limit of 25% of the value of the composite supply - Ordered accordingly - Rate of tax on milling of food grains where exemption under Serial No. 3A of Notification No. 12/2017-Central Tax (Rate) is not available - Applicant was engaged in milling of food grains into flour for the State Government Food and Supplies Department for distribution under the Public Distribution System as a composite supply - What shall be the rate of GST on such milling if it does not fall in entry No. 3A - HELD - Where the condition of the notification is not fulfilled, that is, where the value of goods exceeds the threshold limit of 25% of the value of the composite supply, the supply fails to qualify for entry No. 3A and the benefit of exemption must be ascertained on a case-to-case basis - In such a case, GST is leviable at 5% on the total value of consideration under serial no. 26(i)(f) of Notification No. 11/2017-Central Tax (Rate).
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