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The government on Monday clarified that commodities and food items such as pulses, cereals, rice, wheat, flour in a single package containing a quantity of more than 25kg or 25litres will not fall in the category of “pre-packaged and labelled commodity” for the purposes of Goods and Services Tax (GST) and will not attract the tax.
For example, the supply of packed flour of 25kg meant for retail sale to the consumer shall be liable to a 5% GST, but the supply of such product in a 30 kg pack shall not attract GST, the Union finance ministry said in a statement issued on Monday morning.
Pre-packaged food items are wrapped or put into a container before being sold to customers.
At its 47th meeting on June 29, the GST Council raised taxes on a host of items such as various types of inks, pencil sharpeners, knives, spoons, LED lamps, solar water heater, and power-driven pumps, including a 5% GST on pre-packaged and labelled food items, effective from Monday.
Also Read | GST: A structural reform towards a unified market
After the council’s decision, traders said the move will damage small businesses. “There is a lot of anger and outrage among the food grains traders of the country on the recommendation of the GST Council for bringing all types of pre-packed and pre-labelled foodgrains and other items under the GST tax slab of 5% which will cause huge loss of business to foodgrain traders across the country,” according to the Confederation of All India Traders (CAIT).
“This decision will empower big brands to capture the market at the cost of small manufacturers and traders. Special food items, cereals, etc., which were not branded till now, were exempted from GST. With this decision of the council, pre-packaged and pre-labelled retail packs including pre-packaged, pre-labelled curd, lassi and buttermilk will now attract GST tax and will cause huge damage to the business of food grains traders in more than 6,500 grain markets across the country,” it said.
“After this decision, agricultural products with pre-packaged labels like paneer, buttermilk, packaged curd, wheat flour, other cereals, honey, papad, food grains, meat and fish (except frozen), puffed rice and jaggery etc. will also become costlier,” it said.
Abhishek Jain, Tax Partner at consultancy firm KPMG in India, said: “The government has issued much-needed clarification in respect of GST applicability on pre-packaged and labelled goods, especially in light of supply of food items like pulses, flour, etc, a change which will be implemented with effect from 18 July 2022. Earlier, GST levy was limited to branded food items packed in unit containers, so this amendment widens the GST net.”
“Some key clarification issued include that the terms pre- packed and labelled will be read in light of the Legal Metrology Act, and as such packages in excess of 25 kgs, and supplies to industrial consumers will be exempt from GST levy,” he added
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