Pre-packed, labelled flour, pulses less than 25kg to attract 5% GST
The Union Finance Ministry released detailed frequently asked questions (FAQs) on the imposition of Goods and Services Tax (GST) on food items ranging from cereals and pulses to curd and lassi.
FollowSingle packages of unbranded, pre-packaged, and labelled food items such as cereals, pulses, and flour weighing more than 25 kg are exempt from the 5 per cent GST levy.
The Union Finance Ministry released detailed frequently asked questions (FAQs) on the imposition of Goods and Services Tax (GST) on food items ranging from cereals and pulses to curd and lassi.
It stated that the GST would apply to specified goods where the pre-packaged commodity is supplied in packages containing less than or equal to 25 kilogrammes.
The limit for a commodity measured in litres, such as curd and lassi, is 25 litres.
Prior to July 18, GST was charged on specified goods when they were placed in a unit container and bore a registered brand name or bore the brand name.
It added, "With effect from July 18, 2022, this provision is changed, and GST is now applicable on the supply of such 'pre-packaged and labelled' commodities."
Items such as pulses, cereals like rice, wheat, and flour (atta) previously incurred 5 per cent GST when branded and packaged. From July 18, these items would be subject to GST if they were 'pre-packaged and labelled.'
Furthermore, other items, such as curd, lassi, and puffed rice, would be subject to 5 per cent GST when 'pre-packaged and labelled.'
A pre-packaged commodity is placed in a package of any kind, whether sealed or not, without the presence of the purchaser so that the product contained therein has a pre-determined quantity.
As per the ministry, a single package of items such as cereals, pulses, and flour containing more than 25 kg/25 litre does not fall under the category of a pre-packaged and labelled commodity for GST purposes; thus, it does not attract GST.
It said that the GST would apply to such supply if several packages intended for retail sale to the ultimate consumer, say 10 packages of 10 kg each, are sold in a larger pack. However, for the GST levy, a package of rice containing 50 kg (in one individual package) would not be considered a pre-packaged and labelled commodity.
According to FAQs, only pre-packaged items weighing up to 25 kg will be subject to 5 per cent GST, but if retail shopkeepers supply the item purchased from a manufacturer or distributor in a 25-kg pack in loose quantity, such sale to consumers will be exempt from GST.
The government announced last week that beginning July 18, unbranded pre-packaged and labelled food items would be subject to a 5 per cent Goods and Services Tax. So far, only branded items have been subject to the levy.
GST would apply when a distributor/manufacturer sells a pre-packaged and labelled package to a retailer who purchases food items in packages weighing up to 25 kg/25 litres.
The FAQs stated that if a retailer supplies the item in loose quantity from such package for any reason, such supply by a retailer is not a supply of packaged commodity for GST levy.
According to KPMG in India Tax Partner Abhishek Jain, the GST levy was previously limited to branded food items packed in unit containers, so this amendment broadens the GST net.
Jain added that some key clarifications issued include the fact that the terms pre-packed and labelled will be read in light of the Legal Metrology Act, and as a result, packages weighing more than 25 kg and supplies to industrial consumers will be exempt from the GST levy.
According to AMRG & Associates Senior Partner Rajat Mohan, the new levy is expected to increase the price of basic food items such as rice and cereals starting today.
The GST Council, chaired by the Union Finance Minister and comprised of state finance ministers, decided last month that pre-packaged and labelled food items would be subject to 5 per cent GST beginning July 18.
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