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    Pre-packaged and labelled food packs over 25 kg will not attract 5% GST

    Pre-packaged and labelled food packs over 25 kg will not attract 5% GST

    Pre-packaged and labelled food packs over 25 kg will not attract 5% GST
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    By Timsy Jaipuria   IST (Updated)

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    According to the government, food grains and items such as pulses, cereals, rice, wheat, flour in a single package containing a quantity of more than 25 Kg or 25 litre would not fall in the category of “pre-packaged and labelled commodity” for the purposes of levying of GST.

    After facing a lot of attacks on a potential inflationary burden which could impact people’s pockets, the central board of indirect taxes and customs came out with a series of FAQs, clarifying the levy of 5 percent GST on food items such as pulses, cereals, rice, wheat, flour in a single package.
    According to the government, food grains and items such as pulses, cereals, rice, wheat, flour in a single package containing a quantity of more than 25 Kg or 25 litre would not fall in the category of “pre-packaged and labelled commodity” for the purposes of levying of GST.
    Thus, making it fairly clear for the industry and the people that in such cases GST cannot be charged.
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    Government in its circular on FAQs has stated the example saying that if the supply of pre-packed atta of 25 kg meant for retail sale to ultimate consumer shall be liable to a 5 percent GST, but supply of such product in a 30 kg pack shall not attract GST.
    According to the government, Pre-packaged food items are those which are wrapped or put into a container before being sold to customers. 
    Not just this, as per the new rates, now if a grocery shopkeeper also sells food items packed with any mark for identification of his item only, or under his independent label, then a GST will be levied on that food item.
    It was last month, when the 47th GST Council meet had considered the proposal made by the Group of Ministers on Rate Rationalization, headed by Karnataka CM BS Bommai, who submitted the interim report seeking withdrawal of certain exemptions to ensure there is no revenue leakage.
    The 47th GST Council in its meeting deliberated on these proposals and all states unanimously decided to raise GST rates on a series of items such as various types of inks, pencil sharpeners, knives, spoons, LED lamps, solar water heater, power-driven pumps, including a 5 percent GST on pre-packaged and labelled food items.
    Following the decision of GST Council, CBIC had issued a notification, bringing in the changes, effective from Monday, July 18, 2022.
    Noting the impact of such a decision and considering it as a negative for the traders, industry and the common man, traders body – Confederation of All India Traders (CAIT), in a statement said, “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 percent 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 added.
    Traders body further says that “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 for the people.”
    However, experts say that the FAQs issued by the government has brought in the much needed clarity for the trade and the industry.
    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 implemented w.e.f 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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