Circular No. 19/19/2017-GST
F. No. 354/263/2017-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax research Unit
North Block, New Delhi
20th November 2017
The Principal Chief Commissioners/Chief Commissioners/ Principal Commissioners/
Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Subject: Clarification on taxability of custom milling of paddy – regarding.
Representations have been received seeking clarification on whether custom milling ofpaddy by Rice millers for Civil Supplies Corporation is liable to GST or is exempted under S. No55 of Notification 12/2017 – Central Tax (Rate) dated 28th June 2017.
2. The matter has been examined. S. No 55 of Notification 12/2017- Central Tax (Rate)exempts carrying out an intermediate production process as job work in relation to cultivation ofplants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel,raw material or other similar products or agricultural produce. Agricultural produce has beendefined in the notification to mean, any produce out of cultivation of plants and rearing of all lifeforms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similarproducts, on which either no further processing is done or such processing is done as is usuallydone by a cultivator or producer which does not alter its essential characteristics but makes itmarketable for primary market. Job work has been defined under section 2 (68) of the CGST Actto mean any treatment or process undertaken by a person on goods belonging to anotherregistered person. Further, under Schedule II (para 3) of the CGST Act, any treatment or processwhich is applied to another person’s goods is a supply of service.
3. Milling of paddy is not an intermediate production process in relation to cultivation ofplants. It is a process carried out after the process of cultivation is over and paddy has beenharvested. Further, processing of paddy into rice is not usually carried out by cultivators but byrice millers. Milling of paddy into rice also changes its essential characteristics. Therefore,milling of paddy into rice cannot be considered as an intermediate productionprocess in relation
to cultivation of plants for food, fibre or other similar products or agricultural produce.
Circular No. 19/19/2017-GST
4. In view of the above, it is clarified that milling of paddy into rice is not eligible forexemption under S. No 55 of Notification 12/2017 – Central Tax (Rate) dated 28th June 2017 andcorresponding notifications issued under IGST and UTGST Acts.
5. GST rate on services by way of job work in relation to all food and food products fallingunder Chapters 1 to 22 has been reduced from 18% to5% vide notification No. 31/2017-CT(R)[notification No. 11/2017-CT (Rate) dated 28.6.17, S.No. 26 refers]. Therefore, it is herebyclarified that milling of paddy into rice on job work basis, is liable to GST at the rate of 5%, onthe processing charges (and not on the entire value of rice).
6. Difficulty if any, in the implementation of the circular should be brought to the notice ofthe Board. Hindi version would follow.
Technical Officer (TRU)