The Central Government vide Circular No. 19/19/2017-GST dated November 20, 2017 has clarified that milling of paddy by Rice millers for Civil Supplies Corporation is not exempted under S. No 55 of Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017, as:
- Milling of paddy is not an intermediate production process in relation to cultivation of plants.
- This process is carried out after the process of cultivation is over and paddy has been harvested.
- This Process is carried out by rice millers not by cultivators.
- Milling of paddy into rice also changes its essential characteristics.
Hence it is clarified that milling of paddy into rice is a supply of service in the nature of job work and therefore liable to GST at the rate of 5%, on the processing charges (not on the entire value of rice).