GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS

Last updated: 15 July 2021

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This circular clarifies the Goods and Services Tax (GST) applicable to the milling of wheat into flour or paddy into rice when these services are provided to State Governments for distribution under the Public Distribution System (PDS). It confirms that such composite supplies are eligible for exemption under Notification No. 12/2017-Central Tax (Rate) if the value of goods used (like fortification or packing) does not exceed 25% of the total supply value. If the exemption doesn't apply, a 5% GST rate is applicable for job work services provided to registered entities.

Circular No. 153/09/2021-GST 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 To, 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 distributionby State Governments under PDS reg.

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FAQ :

The circular clarifies the GST treatment for the milling of wheat into flour or paddy into rice when these services are provided to State Governments for distribution under the Public Distribution System (PDS).

The composite supply of milling (including fortification) is exempt from GST if the value of goods (like fortification materials or packing) does not exceed 25% of the total supply value, and it is provided to a government entity for PDS.

If the milling service does not qualify for exemption because the value of goods exceeds 25%, the applicable GST rate is 5% if it's considered a job work service provided to a registered person.

A 'registered person' includes entities registered for tax deduction purposes under Section 51 of the CGST Act.

Articles 243G and 243W of the Constitution, concerning functions entrusted to Panchayats and Municipalities respectively, are relevant as PDS activities fall under these.