GST On pre-packed and Labeled Retail Packs of Food Items

  • September 26, 2022
  • GST
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GST On Pre-Packed and Labeled Food ItemsThe 47th GST Council meeting held on June 28th and 29th, 2022, produced a new proposal stating that GST will be levied at 5% on pre-packaged and labeled food items beginning July 18th, 2022. This was announced in Notification No. 06/2022-CT (Rate) on July 13, 2022. This idea comes after the GST Council, the highest decision-making body, supported the majority of the Group of Ministers’ recommendations on eliminating exclusions in order to rationalize the charge. So it is critical that we understand how this would affect things purchased through Malls, Kirana Shops, Dal Mills, Wholesale, Retail, and other mom-and-pop establishments, as well as Agri products.

Table of Content

Quick Look

The current GST rate for branded food grains is 5%, and this rate will remain in effect. According to a press statement from the GST Council, starting on July 18, 2022, GST would be applied to unbranded food grains that are pre-packaged and pre-labeled retail packets in accordance with the Legal Metrology Act, 2009. According to Notice No. 6/2022-CT Rate from July 13, 2022, a variety of these things were only excluded if they weren’t “pre-packaged and branded.”

Let us first understand the basic understanding of Pre-Packed, Retail, and Wholesale Commodity before we move on to discuss the GST Rates on Food products.

What items would be considered pre-packaged and tagged for GST purposes?

The term “pre-packaged and labeled” refers to a “pre-packaged commodity” as defined in clause (l) of section 2 of the Legal Metrology Act, 2009, where the package in which the commodity is pre-packed or a label securely affixed thereto is required to bear the declarations pursuant to the provisions of the Legal Metrology Act, 2009 and the rules made thereunder.

According to the definition above, there are two requirements that must be met in order to impose GST on food goods, namely:

  • First, clause (l) of section 2 of the Legal Metrology Act, 2009 should apply to commodities.
  • Second, in accordance with the 2011 Legal Metrology (Packaged Commodities) Rules, the seller must be compelled to include a declaration on the package.

Meaning of Pre-Packaged Commodity

According to Legal Metrology Act, 2009 Section 2(l), “Pre-packaged commodity” refers to a good that has been put into a container of any kind, whether sealed or not, without the buyer being present such that the quantity of the good within is predetermined;

Therefore, the product must be packaged without the customer present and have a predetermined quantity in order to qualify under this provision. Items packed over the counter in front of the client, for instance, are outside the scope of this section and the GST as well.

Meaning of Retail Package

According to Rule 2(k) of Legal Metrology (Packaged Commodities) Rules, 2011According to Rule 2(k) of The Legal Metrology (Packaged Commodities) Rules, 2011 “Retail package” refers to the containers that are made to be sold at retail to the final customer for the purpose of consuming the commodity they contain, which includes containers that are imported with the exception that industrial or institutional customers are not considered “ultimate consumers” for the purposes of this provision.

Meaning of Wholesale Packages

The Legal Metrology (Packaged Commodities) Rules, 2011, Rule 24 states that certain declarations must be made on every wholesale package. Every wholesale packaging must have a clear, readable, plain-language statement that states:

  • The manufacturer’s or importer’s name and address, or, in cases where the packer is not the manufacturer or importer, the packer’s name and address;
  • the description of the product within the packaging; and
  • the total number of retail packages contained in the wholesale package in question, or the net amount of the commodity contained in the wholesale package expressed in terms of standard units of weights, measures, or numbers;

With the exception that nothing in this rule will apply to a wholesale package if legislation now in effect requires a declaration on such packages that is similar to the declarations described in this rule.

GST Rates on Food Products

A new proposal from the 47th GST Council meeting held on June 28 and 29, 2022, states that starting on July 18, 2022, GST will apply to pre-packaged and labeled packs of food items at a rate of 5%.

Additionally, it was made clear that a retail shopkeeper selling an item to customers in loose form after purchasing it in a 25-kg box from a manufacturer or distributor would not be subject to the GST.

A list of commonly asked questions (FAQs) on the application of GST to “pre-packaged and labeled” items has been published by the CBIC.

The Legal Metrology Act, 2009’s definition of “pre-packaged commodity” in the context of food goods (such as pulses, cereals like rice, wheat, flour, etc.) would apply if the supply of such pre-packaged and marked packets comprised a quantity up to 25 kilogram’s (or 25 liters).

According to the statement made by CBIC, “It is clear that a single package of these commodities (cereals, pulses, flour, etc.) comprising a quantity of greater than 25 Kg/25 liter would not fall within the category of a pre-packaged and labeled commodity for the purposes of GST and would thus not collect GST.”

According to the CBIC, a 25 kg supply of pre-packaged atta intended for retail sale to the final customer shall be subject to GST. However, the sale of such a 30-kg bundle must not be subject to the GST charge.

The board further stated that GST would be applicable to packages that comprise numerous retail packages, such as a box that has 10 retail packs of flour that each weighs 10 kg. It said that for the purposes of the GST, a pre-packaged commodity would be defined as a commodity that is put in a container of any kind, whether sealed or not, without the customer being present, such that the product included within has a pre-determined amount.

Exemptions of Food Grains under the Amendment

Taking into account the numerous CBIC clarifications, the following food grains are excluded under the amendment:

  • Products such as food and grains that are sold in bulk
  • Food goods, cereals, etc., whose packaging lacks any markings.
  • Food grains are packaged and sold to customers in front of them based on the quantity he has requested.
  • Unregistered branded food grains that do not comply with the Legal Metrology Act’s requirements for pre-packaged and pre-labeled retail packs.
  • Food goods, cereals, etc. that weigh more than 25 kg in packaging but on which the seller has waived the brand’s actionable claim.
  • When packaging agricultural farm products, packages greater than 50 kg.
  • Packages containing 10g/10ml or less

Quick GST Registration in JaipurEndnote

Since the implementation of the GST, the government has been working to increase the number of goods and services subject to taxation while reducing exemptions. The most well-known catchphrase for Indian socialism is “Roti, kapda aur makaan.” Kapda and Makaan” have been subject to taxes up to this point. However, the GST did not apply to flatbread or basic culinary components.

For the first time, pre-packaged commodities are being used to bring basic food items under the tax net. The food dealer sector is in a frenzy for the same reason. This taxability’s effects would be severe. This revocation of exemption will have a direct impact on the average person, or “aam aadmi.” For the sheer reason of being competitive and avoiding taxes, grocery stores or Kirana sellers would undoubtedly prefer selling things in loose amounts as opposed to ones that are pre-packed. This may have other effects, too, such as those related to hygiene, falsified weight systems, and unrestricted food quality. Additionally, small businesses that deal in unbranded food products would be worst hit by this ruling.

They were exempt from obtaining a GST registration and performing compliances up until this point. However, as a result of this shift, they will need to register for GST (if the threshold is crossed).

By following a few simple procedures, Legal Window can assist you with submitting GST Returns for any type of provider or company while offering the greatest support, on-time delivery, and ensuring the highest level of client satisfaction. Contact our staff at 072407-51000 or by email at admin@legalwindow.in.

 

CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

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