Clarification on Taxability of Custom Milling of Paddy
<p><a href="https://cms.plasament.com/storage/circularno-19-cgst.pdf">circularno-19-cgst</a><br><span>In Circular No. 19/19/2017-GST, dated November 20, 2017, the Ministry of Finance, Government of India, provides critical clarifications on the taxability of custom milling of paddy under the GST regime. It addresses representations received on whether such milling services, especially when conducted by Rice Millers for Civil Supplies Corporations, are exempt under Notification No. 12/2017-Central Tax (Rate) or subject to GST.</span></p><h4>Key Highlights:</h4><ol start="1"><li><span><strong>Scope of Exemption</strong>: Custom milling of paddy is not considered an intermediate production process related to the cultivation of plants and hence does not qualify for exemption under Notification No. 12/2017.</span></li><li><span><strong>Definition of Agricultural Produce</strong>: The definition emphasizes that agricultural produce refers to products that retain their essential characteristics after minimal processing.</span></li><li><span><strong>Job Work Definition</strong>: Defined under Section 2(68) of the CGST Act, job work is any treatment or process undertaken by one person on goods belonging to another registered person.</span></li><li><span><strong>GST Rate Clarification</strong>: Custom milling of paddy into rice, when done as job work, attracts GST at a reduced rate of 5% on the processing charges.</span></li><li><span><strong>Implementation Guidance</strong>: The circular clarifies that the GST rate reduction applies to all food and food products under Chapters 1 to 22.</span></li></ol><p><span>The circular is aimed at resolving ambiguities and ensuring a uniform approach to the taxability of such services, with an emphasis on the statutory definitions and scope of applicable exemptions.</span></p>