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)
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.
Technical Officer (TRU)