Single package of cereals, pulses, flour etc. weighing more than 25 kg not to attract GST

Central Board of Indirect Taxes & Custom (CBIC) has clarified that a single packet of cereals, pulses, rice, flour etc. weighing more than 25 kg or 25 litres will not attract Goods & Services Tax (GST). However, multiple retail packs totalling 25 kg or more will attract GST. 

Meanwhile, government sources said that recommendation to levy GST on pre-packaged was taken by GST Council based on the suggestion of Group of Ministers. “It is not a decision by the Central government,“ a source said. Further, he added that both GST Council and GoM have representation from Opposition-ruled States also. He also said that many of food grains used to attract VAT in pre GST days

“it is clarified that a single package of these items [cereals, pulses, flour etc.] containing a quantity of more than 25 kg/25 litre would not fall in the category of pre-packaged and labelled commodity for the purposes of GST and would therefore not attract GST,” CBIC said in a set of Frequently Asked Questions (FAQ), released late on Sunday. 

However, if several packages intended for retail sale to ultimate consumer, say 10 packages of 10 kg each, are sold in a larger pack, then GST would apply to such supply. “Such package may be sold by a manufacturer through distributor. These individual packs of 10 kg each are meant for eventual sale to retail consumer,” the FAQ 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, even if rule 24 of Legal Metrology (Packaged Commodities) Rules, 2011, mandates certain declarations to be made on such wholesale package. 

Definition

Based on the GST Council recommendation, the Government notified imposition of GST on ‘pre-packaged, pre-labeled’ items with effect from Monday. This enables “imposition of GST on specified goods when bearing a registered brand or brand in respect of which an actionable claim or enforceable right in a court of law is available to imposition of GST on such goods when ‘pre-packaged and labeled’.” Such a change covered items such as curd, lassi, butter milk, rice, wheat, wheat flour beside number of dairy and food grains. The definition of ‘pre-packaged and labeled’ in the Legal Metrology Act, 2009 has been used for this new provision. 

The said act defines “pre-packaged commodity” as a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a predetermined quantity. Since GST Council’s recommendation is for retail sales, FAQs say in the context of food items (such as pulses, cereals like rice, wheat, flour etc), the supply of specified pre-packaged food articles would fall within the purview of the definition, if the quantity is up to 25 kilogram or 25 litre. 

Clarification

This clarification was required as many of tax experts and trade bodies interpret GST could be levied on food items weighing more than 25 kg. Now CBIC says “for food items such as pulses, cereals, flour, etc. Legal Metrology (Packaged Commodities) Rules, 2011, prescribes that package of commodities containing quantity of more than 25 kg or 25 litre do not require a declaration to be made under rule 6.” Accordingly, GST would apply on such specified goods where the prepackaged commodity is supplied in packages containing quantity of less than or equal to 25 kilogram. 

Further it said that supply to hotels, canteens etc. will not attract GST. Also, loose sale from a packet of 25 kg will not attract GST. 

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