In re Seetharamanjaneya Dal And Fried Gram Mill (GST AAR Andhra Pradesh)
Question: Whether the supply of red gram dall 2600 MTs by receiving 3823.529 MTs of red gram under barter system attracts any tax under GST?
Answer: Applicant is appointed as “miller cum transporter”, for the purpose of conversion of red gram whole to red gram dall @68% of outturn ratio. Hence, the argument of the applicant treating the activity under taken in the instant case, as ‘barter system’ is misconstrued. It is nothing but ‘job work’ carried out on the whole red gram supplied to the applicant.
Now, we examine whether the activity of milling of whole red gram to red gram dall by the millers is liable to GST or not. The clarification issued in this regard on the custom milling of paddy is applicable as well in the instant case.
Milling of Red gram fall under the Serial No.26 Heading 9988 (i) (f) of the Notification no.11/2017 Central Tax Rate dated 28.06.2017 and as amended from time to time and liable to tax @ 5%.
The transaction cannot be considered as ‘barter’, but a ‘job work’ and attracts the tax rate of 5% under Serial No.26 Heading 9988 (i) (f) of the Notification No.11/2017 Central Tax Rate dated 28.06.2017 as amended from time to time.
Question: Whether the packing charges of Rs.4.50 received by the applicant for packing 1Kg. of red gram dall supplied to the said Corporation are taxable?
Answer: In the instant case, the custom milling is the principal supply, while the packing charges of Rs.4.50 received by the applicant for packing of I Kg. of red gram dall supplied to the said Corporation constitutes ancillary supply. As seen from the agreement, it is a single contract of composite supply comprising of two or more taxable supplies like milling, transportation and packaging services. Out of which, milling is the principal supply and the rest of the supplies are liable to be taxed at the same rate of principal supply.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, ANDHRA PRADESH
1. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and SGST Act, 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the APGST Act.
2. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by M/s. Seetharamanjaneya Dal and fried Gram Dali, Guntur (hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017.
3. Brief Facts of the case:
The Applicant is engaged in the business of pulses and dalls with a facility in its mill to convert pulses into dalls. The Andhra Pradesh state civil supplies corporation, limited, Vijayawada, which is a State Government undertaking engaged in the business of supplying essential commodities to the Fair price shops for public distribution, has given a work order dated 13.05.2019 to the applicant. The applicant is appointed as miller cum transporter for conversion and supply of resultant red gram dall to allotted districts of Zone-TI (Vizianagaram & East Godavari) and is ordered to lift a quantity of 3823.529 MTs of indigenous variety of red gram whole from the allotted godowns of NAFED and to supply 2600 MTs of resultant red gram dall in 1 kg packet form to the allotted districts. Further the miller is ordered to supply the resultant red gam dall in 1kg packet form to the MLs points of allotted districts after conversion @68% of outturn ratio and the incidental charges @ Rs.498/- per quintal of unmilled tur will be paid to the miller additionally after completion of the supplies.
The applicant submitted that in respect of the above transaction, whole red gram was purchased before hand and it was converted into dall and supplied in advance to the corporation. Subsequently after receipt of dall, Corporation has sent whole red gram to the applicant as per its convenience and availability.
4. Questions raised before the authority:
1. Whether the supply of red gram dall 2600 MTs by receiving 3823.529 MTs of indigenous red gram under barter system attracts any tax under GST?
2. Whether the packing charges of Rs.4.50 received by the applicant for packing I Kg. of red gram dall supplied to the said Corporation are taxable?
On Verification of basic information of the applicant, it is observed that the applicant falls under State jurisdiction, i.e. Vinukonda circle, Narasaraopet Division. Accordingly, the application has been forwarded to the jurisdictional officers and a copy marked to the Central Tax authorities to offer their remarks as per Sec. 98(1) of CGST /APGST Act 2017.
In response, no remarks are received from the jurisdictional officers concerned for which the Advance Ruling was sought by the applicant.
5. Applicant’s Interpretation of Law and Facts:
The applicant claims that he has not undertaken any treatment or process on the goods belonging to the Corporation and he did neither job work nor custom milling. The applicant submits that he has supplied his own dall in advance, and has not milled pulses belonging to the Corporation, which is evident from the books of account and work orders. The applicant stated that though the initial arrangement looked like ‘custom milling’; the transaction had actually taken the shape of’barter’ subsequently.
‘Barter’ is a system in which people exchange goods and services for goods and services in return. Relevant extract from the central Act relating to ‘barter’ and ‘ supply are as follows:-
Section 7 (1) For the purposes of this Act, the expression “supply” includes -(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;”
The applicant submits that in these transactions, the components of ‘service’ (custom milling) are wholly absent and on the other hand, it is demonstrated that it is a transaction of exchange of goods falling under the category of ‘barter’. When once it is considered as a transaction of barter of goods, it falls outside the scope of ‘service’ i.e., no custom milling of red gram whole.
Applicant further submits that as per Para 1 (a) in Schedule II to the Central Act, ‘any transfer of the title in goods is a supply of goods.’ As applicant has transferred red gram dall in advance even before receipt of whole red gram from the Corporation, there was transfer of title in red gram dall in favour of the corporation and accordingly there was supply of goods.
Without prejudice to the above, applicant submits that Notification No. 12/2017-CTR dated 28 06.2017 enumerates services which have NIL rate of GST. In that Notification, Entry No.55 reads as follows:-
