Unbranded prepackaged and labelled food items such as cereals, pulses and flour weighing less than 25 kg/litre attracted 5% goods and services tax (GST) from Monday.
In a detailed frequently asked questions (FAQs), finance ministry said, “GST would apply on such specified goods where the pre-packaged commodity is supplied in packages containing a quantity of less than or equal to 25 kilograms.” For a commodity measured in litres like curd and lassi, the limit is 25 litres.
Prior to July 18, GST applied on specified goods when they were put up in a unit container and were bearing a registered brand name or were bearing the brand name. “With effect from the 18th July 2022, this provision undergoes a change and GST has been made applicable on supply of such ‘pre-packaged and labelled’ commodities,” it said. aAfter two days of deliberations on June 28-29, the GST Council had decided to bring a large number of such products including curd, lassi, butter milk, paneer, honey, makhana, wheat, rice and puffed rice under the GST net.
The ministry said a single package of items like cereals, pulses and flour containing a quantity of more than 25 kg/25 litre would not fall in the category of a pre-packaged and labelled commodity for the purposes of GST and would therefore not attract GST.
“If several packages intended for retail sale to the ultimate consumer, say 10 packages of 10 kg each, are sold in a larger pack, then GST would apply to such supply,” it said. “However, a package of say rice containing 50 kg (in one individual package) would not be considered a pre-packaged and labelled commodity for the purposes of GST levy.” FAQs clarified that only pre-packed items up to 25 kg will attract 5 per cent GST but if a retail shopkeeper supplies in loose quantity the item bought from a manufacturer or a distributor in a 25-kg pack, such sale to consumers will not attract GST. The notification suggested that a pre-packaged and labelled commodities (specified commodities) would cover those commodities which require a declaration under the Legal Metrology Act, 2009. Under this Act, a mandatory declaration is required on retail as well on wholesale package. Thus, even wholesale packages (with unregistered brand) of specified commodities would have been covered under the ambit of GST.
“The government has made a welcome move by issuing a FAQ which clarifies that wholesale packages of specified commodities even when requiring declaration under the Legal Metrology Act would not be subject to levy of GST,” said Saurabh Agarwal, Tax Partner, EY India said.