The fact that the country’s largest selling rice brand, India Gate, is exempt from the 5% goods and services tax (GST) since the popular brand is not registered under the Trade Marks Act 1999 has driven a wedge between KRBL, which owns India Gate, and other major branded rice traders. All India Rice Exporters Association (AIREA), in which most branded rice firms are members, has written a letter to finance minister Arun Jaitley, asking him to correct the anomaly in the relevant notification dated June 28, by stating essentially that a “registered brand name” in this context need not be one registered under the Trade Marks Act.
It is, however, unclear whether the Centre would accept the request as even in a clarification issued on July 7 on the said notification, the finance ministry maintained that “…In this regard, Section 2 (w) read with Section 2 (t) of the Trade Marks Act, 1999 provide that a registered trade mark means a trade mark which is actually on the Register of Trade Marks and remaining in force. Thus, unless the brand name or trade name is actually on the Register of Trade Marks and is in force under the Trade Marks Act, 1999, CGST rate of (2.5%) will not be applicable on the supply of such goods.”
“There is a growing feeling among the members, with a fully registered brand name, of being at a comparative disadvantage specifically against companies with a popular brand name, but not registered or a company who’s registration for trademark application is still in process,” Vijay Setia, president, AIREA, wrote in the letter to Jaitley.
KEBL, interestingly, has been waging a legal battle for several years to get the India Gate trademark registered. Anil K Mittal, CMD of KRBL, did not respond to phone calls, email and SMS.
“There will be unhealthy competition in the trade, encouraging malpractices if the government does not provide clarification on GST taxation,” the AIREA letter stated.
Incidentally, KRBL is also a member of AIREA. The relevant notification (no.1/2017-Central Tax (Rate) says the phrase “registered brand name means brand name or trade name…… and which is registered under the Trade Marks Act, 1999”.
Owners of branded rice a divided lot
AIREA’s Setia said by changing the second phrase to “or which is registered under…”, the anomaly could be corrected. There is also the practice of corporate groups getting a brand registered under any one company and other group companies too capitalising on the brand value without actually having the brand registered in their favour.
Industry sources said that “unregistered brands” have a share of more than 90% of branded rice market. Mostly basmati and non-basmati varieties such Sona Masuri are sold under various brand names. However, the share of branded rice in total rice trade is just around 5%.
As per the finace ministry statement on July 2, GST rate on staples such as rice, wheat and cereals is zero.