Facts:

In the recent advance ruling of Seetharamanjaneya Dal and Fried Gram Mill cited in [2021] 131 taxmann.com 37 (AAR – ANDHRA PRADESH), the Applicant is engaged in the business of pulses and dalls with a facility in its mill to convert pulses into dalls. The applicant is appointed as miller cum transporter for conversion and supply of resultant red gram dall to allotted districts of Zone-II (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 by Andhra Pradesh state civil supplies corporation, limited, Vijayawada, which is a State Government undertaking.

Issues

• 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?
• Whether the packing charges of Rs. 4.50 received by the applicant for packing 1 Kg. of red gram dall supplied to the said corporation are taxable?

Held

• It is evident from the facts that the 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. AAR in this respect held that it is nothing but ‘job-work’ carried out on the whole red gram supplied to the applicant. Thus, the milling of red gram falls under the Serial No.26 Heading 9988 (i) (f) of the Notification no.11/2017 Central Tax Rate, dated 28-6-2017 and as amended from time to time is liable to tax @ 5%.
• The packing charges offered are nothing but incidental and ancillary to the main supply of milling and transportation of red gram dall.
  Section 8(a) of CGST Act, 2017 explains the tax liability of composite supplies as under:
  A composite supply comprising of two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.
  In the instant case, custom milling is a principal supply, while the packing charges of Rs. 4.50 received by the applicant for packing of 1 kg. of red gram dall supplied to said corporation constitutes ancillary supply.
  Therefore, AAR held that it will be taxed at the same rate at which principal supply is taxed.