KRBL India Gate Basmati Mandi Procurement Reconciliation

A listed basmati miller closes its October procurement books with 48,200 metric tonnes of paddy aggregated across a network of Punjab (Sangrur, Bathinda) and Haryana (Kaithal, Karnal) mandis, purchased through 340 licensed arhtia commission agents and delivered to three inland milling plants at Karnal, Sonipat, and Ghaziabad. The average purchase rate for a 1121 basmati paddy grade lands at Rs 4,420 per quintal at the auction hammer; the arhtia commission at 2.5 percent kachha arhtia rate accrues to a separate settlement note; Section 194Q at 0.1 percent TDS deducts against the arhtia PAN once aggregate purchase for the financial year crosses Rs 50 lakh; and the milling by-product — broken rice, husk, and bran — moves to the group’s distillery arm at CGST Rule 28 open-market valuation as feedstock for grain-based ethanol supplied under the Ethanol Blended Petrol tender to an oil marketing company. This is KRBL India Gate basmati mandi procurement reconciliation at operating scale, and the discipline that keeps the miller’s Form 26Q filing, its GSTR-1 inter-unit output, and its distillery lifting register simultaneously clean is what separates a well-run listed basmati house from one that spends the following financial year responding to Section 201 short-deduction notices and Rule 28 valuation queries.

Quick reference

The reconciliation in one paragraph

A listed basmati miller operating three inland plants — the model relevant to a house such as KRBL, marketed under the India Gate brand — runs a four-leg procurement cycle at peak season. The mandi arhtia auctions the farmer’s paddy in the notified market yard of Sangrur or Bathinda in Punjab or Kaithal or Karnal in Haryana, issues a gate-pass and settlement note keyed to the arhtia licence number and PAN, and dispatches the paddy in trucks or tractor-trailers to the miller’s designated plant. The plant weighbridge re-weighs each consignment on arrival and books the net weight against the arhtia settlement note; variance beyond the 0.25 percent tolerance band is exception-flagged on the procurement register close. Section 194Q TDS at 0.1 percent triggers on the paddy price component (excluding mandi fee, rural development cess, and arhtia commission) once aggregate purchase from a single arhtia PAN crosses Rs 50 lakh for the financial year; the miller remits under code 1017 or 1031 through Form 26Q. Section 194H TDS at 5 percent deducts separately on the arhtia commission line under code 1015. Milling by-products — broken rice, husk, bran — move to the group’s ethanol distillery arm at CGST Rule 28 open-market valuation and feed a grain-based ethanol output tally reconciled weekly against the OMC lifting confirmation under the 20 percent EBP blending programme.

What the scenario looks like in India

The Indian basmati processing industry is concentrated in the Indo-Gangetic plain and dominated by a handful of large listed millers and unlisted family-held houses. The reference persona for this article is a listed miller of the scale of KRBL Limited (marketed under the India Gate brand) running three inland milling plants at Karnal (Haryana), Sonipat (Haryana), and Ghaziabad (Uttar Pradesh), aggregating approximately 40,000 to 55,000 metric tonnes of basmati paddy per month during the October to December peak procurement window from a network of licensed arhtia commission agents in Punjab (Sangrur, Bathinda, Muktsar, Faridkot) and Haryana (Kaithal, Karnal, Kurukshetra, Panipat). Peer millers operating at a comparable scale include LT Foods (Daawat brand), Kohinoor Foods, Chaman Lal Setia (Maharani), and Amira Nature Foods — each with a slightly different plant network but a broadly comparable four-leg mandi procurement discipline.

The paddy variety mix is skewed heavily to Pusa Basmati 1121 — the workhorse export-grade variety that accounts for the majority of premium basmati sold into the Middle East and Iran markets — with PB1509 (a shorter-duration variety that eases the mandi arrival timing) and Pusa (traditional basmati, higher price realisation but lower yield) making up the balance. The auction sale price at the mandi hammer during a typical peak season lands in the Rs 4,000 to Rs 4,800 per quintal band for the 1121 grade at good milling quality, with premium and discount adjustments for grain length, moisture, and admixture. The mandi arhtia collects a commission of 2.5 percent on the auction sale value under the kachha arhtia framework prescribed by the state Marketing Board — Punjab under the Punjab Agricultural Produce Markets Act 1961, Haryana under the Haryana Agricultural Produce Markets Act 1961.

Two features of the KRBL-scale procurement model shape the reconciliation surface. First — the miller operates its own ethanol distillery arm alongside the main rice milling business, and the milling by-product stream (broken rice, husk, bran) feeds directly into distillery feedstock for grain-based ethanol output. The cross-flow between the milling unit’s GSTIN and the distillery unit’s GSTIN is a supply for GST purposes under Section 25(4) of the CGST Act 2017 even without monetary consideration, valued under Rule 28 at open market value or 110 percent of cost. Second — the miller also operates a branded basmati export business under HSN 1006 30 20 (raw basmati) and 1006 30 90 (parboiled basmati) into markets that were governed by the DGFT Minimum Export Price mechanism from September 2023 (USD 1,200 per metric tonne floor) to October 2023 (USD 950 per metric tonne) and finally to MEP withdrawal in September 2024. Export reconciliation runs against e-BRC and shipping bill matched at the DGFT portal and closes into the RoDTEP scrip claim under Appendix 4R.

The regulatory overlay — Section 194Q, Section 194H, and inter-unit Rule 28

Three regulatory anchors govern the mandi procurement and inter-unit cross-flow chain, and each maps to a specific reconciliation surface.

Section 194Q of the Income-tax Act 1961, introduced by Finance Act 2021 with effect from 1 July 2021 and retained in the Income-tax Act 2025 as Section 393 Sl. 8 code 1031 (with the parallel code 1017 applied by some assessees to certain high-value agricultural and commodity purchases per their chart-of-accounts classification), requires any buyer whose total sales, gross receipts, or turnover from the business exceeded Rs 10 crore in the immediately preceding financial year to deduct TDS at 0.1 percent of the aggregate value of purchases from a resident seller that exceeds Rs 50 lakh in the current previous year. Where the seller has not furnished PAN, the rate rises to 5 percent under Section 206AA. A listed basmati miller of the KRBL scale comfortably exceeds the Rs 10 crore turnover trigger; its aggregate purchase from any single mandi arhtia during a peak procurement season routinely crosses Rs 50 lakh per PAN within the first few weeks of the October arrival window. The reconciliation surface for the miller is an arhtia PAN-level running total table refreshed at every purchase entry, a Rs 50 lakh threshold cut-over date stamp per arhtia PAN, and a monthly Form 26Q filing keyed to code 1017 or 1031 as per the miller’s chart of accounts. CBDT Circular 13 of 2021 dated 30 June 2021 settled the interplay between Section 194Q and Section 206C(1H) TCS — where both provisions technically apply to the same transaction, Section 194Q takes precedence and the seller does not collect TCS at 0.1 percent.

Section 194H of the Income-tax Act 1961 (codified as Sl. 18 code 1015 in the Income-tax Act 2025) requires any person other than an individual or HUF paying commission or brokerage to a resident to deduct TDS at 5 percent on credit or payment, whichever is earlier, above the Rs 15,000 aggregate per payee per FY threshold. The mandi arhtia acting as a licensed commission agent under the state APMC framework is a commission agent for Section 194H purposes; the commission — typically 2.5 percent of the auction sale value under the kachha arhtia framework for basmati paddy — is separately identified on the arhtia’s settlement note to the miller. The miller deducts TDS at 5 percent on the commission line under code 1015, keyed to the arhtia’s PAN, and remits through Form 26Q — on a separate accrual from the 194Q deduction on the paddy price component. Two distinct TDS deductions land on the same arhtia PAN each month, and the arhtia’s own Form 26AS reflects both credits separately.

Section 25(4) of the CGST Act 2017 read with Rule 28 of the CGST Rules 2017 governs inter-unit transfers between two GSTINs of the same legal entity (or between two distinct GSTINs held by group companies). A transfer of milling by-product (broken rice HSN 1102, bran HSN 2302, husk HSN 2303) from the miller’s Karnal or Sonipat milling GSTIN to the group’s distillery GSTIN is a supply for GST purposes even without monetary consideration. Valuation is at open market value where determinable; where not determinable, at 110 percent of the cost of production or supply. The transferee distillery unit avails ITC on the transfer invoice, and the aggregate month-end inter-unit stock ledger must clear the receivable and payable to a zero balance. Mis-valuation exposure — most commonly, transferring at cost instead of 110 percent of cost when open market value is not established — triggers Section 74 short-supply demand risk.

A worked example — an October peak-season mandi close

Illustrative — the following figures represent the operating pattern of a listed basmati miller of the KRBL scale during a peak procurement season. Public disclosures do not reveal per-arhtia settlement detail; cross-verify against your own procurement register extract before action.

A listed basmati miller operating three inland plants at Karnal, Sonipat, and Ghaziabad aggregates 48,200 metric tonnes of paddy across the month of October through a network of 340 licensed arhtias in Punjab (140 arhtias across Sangrur, Bathinda, Muktsar, Faridkot) and Haryana (200 arhtias across Kaithal, Karnal, Kurukshetra, Panipat). The variety mix is 78 percent Pusa Basmati 1121 (37,596 MT), 15 percent PB1509 (7,230 MT), and 7 percent Pusa traditional (3,374 MT). The average auction sale price at the mandi hammer lands at Rs 4,420 per quintal for 1121 and Rs 3,850 per quintal for PB1509, with the Pusa traditional grade at Rs 5,600 per quintal.

An illustrative single arhtia in Sangrur mandi transacts 320 metric tonnes across the month at an average of Rs 4,420 per quintal for 1121 grade. Aggregate paddy value: 320 MT × 10 quintals per MT × Rs 4,420 per quintal = Rs 1.414 crore. Arhtia commission at 2.5 percent: Rs 3,53,600. Mandi fee (typically 1 percent of sale value) and rural development cess (typically 3 percent) accrue separately to the state Marketing Board.

The Section 194Q running total for this arhtia PAN crossed the Rs 50 lakh threshold on 12 October at Rs 51.2 lakh cumulative for the financial year. From 12 October forward, the miller deducts 0.1 percent on the incremental paddy value only (Rs 1.414 crore minus Rs 51.2 lakh = Rs 90.2 lakh incremental in October). Section 194Q TDS for October on this arhtia PAN: 0.1 percent of Rs 90.2 lakh = Rs 9,020, remitted under code 1017 or 1031 through Form 26Q.

Separately, Section 194H TDS at 5 percent on the arhtia commission line of Rs 3,53,600: Rs 17,680, remitted under code 1015 through the same Form 26Q filing keyed to the same arhtia PAN.

Aggregating across the 340-arhtia network at similar throughput, the miller’s October Form 26Q filing base carries approximately Rs 32 lakh in 194Q code 1017/1031 accrual and approximately Rs 62 lakh in 194H code 1015 accrual, with each arhtia PAN’s threshold cut-over date stamped for audit trail.

The milling by-product cross-flow to the distillery arm for the same month works out as follows. Basmati paddy at an outturn ratio of approximately 65 percent yields around 31,330 MT of head rice from the 48,200 MT paddy input, with the balance 16,870 MT split as broken rice (approximately 4,820 MT at 10 percent), husk (approximately 9,640 MT at 20 percent), and bran (approximately 2,410 MT at 5 percent). Of the broken rice and bran, an illustrative 3,600 MT is transferred to the group’s distillery GSTIN as ethanol feedstock at CGST Rule 28 open-market valuation.

The distillery arm avails ITC on the Rs 7.68 crore transfer invoice, produces grain-based ethanol at an approximate conversion of 380 to 420 litres per MT of broken rice feedstock, and supplies the ethanol output under HSN 2207 20 00 to the designated OMC (IOCL, BPCL, or HPCL) blending depot at 5 percent GST. The OMC lifting confirmation lands with a two-day dispatch lag against the distillery output timestamp; reconciliation normalises the timestamp so the phantom short-lift closes cleanly at month-end.

Common reconciliation breakages

Five breakages recur across large listed basmati millers running Punjab and Haryana mandi procurement chains at peak-season scale.

• Gate-pass to weighbridge quantity variance beyond tolerance. The arhtia’s gate-pass at Sangrur or Kaithal records the auction weighment at the mandi weighbridge; the miller’s plant weighbridge at Karnal or Sonipat re-weighs on arrival. A variance up to 0.25 percent is treated as sampling and calibration tolerance and absorbed. Variance beyond the band typically indicates short-weighment at the mandi weighbridge, leakage in transit, or moisture loss on a long-distance haul. Unresolved variance inflates the procurement liability at the arhtia PAN and creates a 194Q TDS over-remittance that requires a Form 26Q correction filing to reverse.

• Section 194Q applied to composite value instead of paddy price alone. The mandi settlement note itemises the paddy price, the mandi fee, the rural development cess, and the arhtia commission separately. Section 194Q applies only to the paddy price component (the payment to the seller); mandi fees and cess are statutory levies to the state Marketing Board, not to the arhtia, and arhtia commission attracts 194H separately. Millers who apply 194Q to the composite invoice total over-deduct TDS and inflate the arhtia’s Form 26AS credit beyond the actual liability — the correction filing burden falls on the miller.

• Arhtia commission credited to the wrong PAN under two-arhtia settlement notes. Some mandi settlement notes cover auctions run through two licensed arhtias in the same firm (a senior and junior partner on the same licence). If the commission is settled to a single PAN when the auction was jointly run, the 194H credit lands on the wrong 26AS and surfaces at the other partner’s income-tax audit as a missing credit. Discipline requires the arhtia licence-to-PAN mapping to be validated at onboarding.

• Inter-unit transfer under-valued at cost instead of Rule 28. Milling by-products transferred to the distillery GSTIN at internal cost — instead of open market value or 110 percent of cost under CGST Rule 28 — exposes the transferor unit to Section 74 short-supply demand. The distillery’s ITC availment on the under-valued invoice is correspondingly reduced, creating a phantom credit gap that surfaces at the distillery unit’s GSTR-2B reconciliation.

• Distillery output register drift against OMC lifting confirmation. The distillery’s daily output register timestamps ethanol production at the distillery gate; the OMC’s dispatch schedule to the blending depot uses a two-day lag confirmation. Reconciliation without timestamp normalisation shows a phantom short-lift that closes only when the OMC’s monthly invoice-cum-payment lands — creating a working-capital reporting error that the CFO’s monthly flash pack carries incorrectly for 20 to 25 days each month.

How a reconciliation platform handles this

A purpose-built agro processing reconciliation platform ingests the mandi arhtia gate-pass and settlement note at every notified market yard, matches the auction weighment against the plant weighbridge net weight within the variance tolerance band, maintains an arhtia PAN-level running total for Section 194Q threshold tracking with a per-PAN cut-over date stamp, applies 194Q code 1017/1031 TDS at 0.1 percent on the paddy price component alone (excluding mandi fee, cess, and commission), applies 194H code 1015 TDS at 5 percent on the arhtia commission line separately, and generates the monthly Form 26Q filing base keyed to each arhtia PAN and each code. It carries the inter-unit transfer register with a CGST Rule 28 valuation note (open market or 110 percent of cost), feeds the distillery arm’s daily output tally against the OMC lifting confirmation with a two-day timestamp normalisation, and — where the miller also runs a branded basmati export business — closes the e-BRC to shipping bill reconciliation for the RoDTEP scrip claim under HSN 1006 30 20 and 1006 30 90. Match rate improvement of 51 to 88 percent on the four-leg mandi procurement chain, combined with an ISO 27001:2022 posture and DPDP Act 2023 aligned data handling, is what makes the platform infrastructure for a listed basmati house rather than a spreadsheet substitute.

Cross-cluster bridges and where to read next

The four-leg mandi procurement discipline in this article sits within the broader basmati and rice processing sub-cluster of Agro Processing. For the branded basmati export cycle governed by the DGFT MEP timeline (USD 1,200 September 2023 to withdrawal September 2024) and the RoDTEP scrip claim under Appendix 4R, read the Basmati rice export reconciliation — MEP and RoDTEP walkthrough. For the peer-house view at the Daawat scale, LT Foods Daawat basmati export reconciliation covers the Royal and Devaaya sub-brand export mechanics. For the state-agency rice procurement chain that intersects at the FCI acceptance test, the FCI Custom Milling Rice outturn reconciliation walkthrough covers the 67 percent raw and 68 percent parboiled outturn ratio discipline. The ethanol distillery cross-flow discussed here connects into the sugar-side ethanol supply chain — for the sugarcane B-heavy and C-heavy molasses ethanol conversion under the 20 percent EBP 2025-26 target, Dwarikesh Sugar EBP ethanol blending 2025-26 reconciliation is the sugar-side counterpart. The umbrella Agro Processing view sits in Agro processing reconciliation India — nine sub-verticals master. For the two-axis multi-tier procurement discipline in the sister dairy sub-cluster, Dairy reconciliation fat SNF milk procurement India is the cornerstone. The TDS-side cross-reference for the Section 194Q payment code 1031 mechanics sits in TDS payment code 1031, Section 393 Sl. 8 purchase of goods. The commercial pillar for the entire agro processing surface is Agro processing reconciliation software India; the broader authority is reconciliation software India.

The five FAQs below address the operational questions Indian basmati miller finance leads and mandi procurement controllers ask most often when implementing structured four-leg mandi paddy procurement reconciliation across a Punjab and Haryana arhtia network.

Terra Insight Editorial Team Reconciliation Infrastructure

Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →

Published 12 July 2026

Domain expertise

TDS Reconciliation GST Input Credit Platform Settlements NACH Batch Matching Bank Reconciliation Form 26AS Matching ERP Integrations Enterprise Finance Ops

Reviewed by

NK

Navin Krishnan

Managing Director & Founder — Terra Insight

Ex Amazon India · Intuit QuickBooks · Tata nexarc

ISO 27001:2022 Patent Pending Incorporated 2024