47th GST Council Meeting was conducted on two days i.e. 28th June 2022 and 29th June 2022 under the Chairmanship of the Finance Minister of India Shrimati Nirmala Sitharaman. In that meeting, it was recommended to revise the scope of exemption with regard to pre-packaged and labelled goods. This article brief on GST applicability on pre-packaged and labelled goods, what condition GST is applicable? and more.
As per the pre-recommended position, notification no. 2/2017- Central Tax (Rate) dated 28th June 2017 covered a list of specified food items which are exempt from GST. Accordingly, specified pre-packaged goods such as rice, wheat, honey, etc. sold either under the brand name for which enforceable rights/ actionable claim is forgone voluntarily or under an unregistered brand name were exempted from GST.
GST on Pre-packaged and Pre-labelled Goods
Following actions were taken by the Government, in order to implement the 47th GST Council recommendations, with regard to GST applicability on pre-packaged and pre-labelled goods –
- Issued notification no. 6/2022- Central Tax (Rate) dated 13th July 2022 [amending rate notification no. 1/2017- Central Tax (Rate) dated 28th June 2017]. The notification introduced new GST rates as applicable to different pre-packaged and labelled goods.
- Issued notification no. 7/2022- Central Tax (Rate) dated 13th July 2022 [amending exemption notification no. 2/2017- Central Tax (Rate) dated 28th June 2017]. The notification withdrew GST exemption on specified pre-packaged and labelled goods.
- Issued Frequently Asked Questions (FAQs) dated 17th July 2022 to clarify GST applicability on pre-packaged and labelled goods.
The present article briefly covers the position of GST applicability till 17th July 2022; an explanation of the term ‘pre-packaged and labelled’ commodity; change in the position of GST applicability as made effective from 18th July 2022 and important clarifications provided vide FAQs issued on 17th July 2022.
GST Position on Packaged and Labelled Till 17th July 2022
GST position on packaged and labelled commodities as applicable till 17th July 2022 is simplified hereunder –
Particulars | GST applicable/ exemption |
|---|---|
Condition 1 – Specified goods put up in a container; and | GST applicable |
Condition 1 – Specified goods put up in a container; and Condition 2 – It is either having an unregistered brand name or a registered brand name in respect of which an actionable claim/ enforceable right is forgone. | GST exempt |
It is important to note that earlier the GST applicability was based on branded/ unbranded goods.
However, with effect from 18th July 2022, the entire concept of applicability of GST on the basis of branded/ unbranded is done away with. Now, the GST applicability is based on the term ‘pre-packaged and labelled’ goods.
What is pre packaged commodity?
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Before understanding the new GST applicability as made effective from 18th July 2022, it is important to thoroughly understand the term ‘pre-packaged and labelled’.
Both the notifications i.e. notification no. 6/2022- Central Tax (Rate) and notification no. 7/2022- Central Tax (Rate) dated 13th July 2022 defines the term ‘pre-packaged and labelled’.
Accordingly, ‘pre-packaged and labelled’ means
- ‘Pre-packaged commodity’ as defined under section 2(l) of the Legal Metrology Act, 2009; and
- Where such a package is required to bear the declaration as per the provisions of the Legal Metrology Act and rules thereunder.
From the above definition of ‘pre-packaged and labelled’, we need to understand the following two things
- Definition of ‘pre-packaged commodity’ as covered u/s. 2(l) of Legal Metrology Act; and
- When affixing declaration is mandatory on the package as per the Legal Metrology Act and rules thereunder.
Let us understand both of them thoroughly hereunder
- 'Pre-packaged commodity’ means a commodity
- Which is packaged without the purchaser being present;
- Such commodity is placed in a package (whether sealed or not) of whatever nature;
- It is packaged so that the commodity contained therein has a pre-determined quantity.
- Rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011 requires that every package needs to declare the following
- Name and address of the manufacturer;
- Name of the commodity;
- Quantity;
- Month and year of manufacture/ pre-packed/ imported;
- Retail sale price; etc.
- As per rule 3 of the Legal Metrology (Packaged Commodities) Rules, 2011, the declaration is not required to
- Packages of commodities containing a quantity of more than 25 kg/ 25 litre; and
- Packaged commodities which are meant for industrial consumers/ institutional consumers.
Change in position of GST applicability on 'pre-packaged and labelled Goods'
With effect from 18th July 2022, GST applicability is totally dependent on the coverage of the term ‘pre-packaged and labelled’. The GST taxability/ exemption as applicable from 18th July 2022 is simplified in the table below
Particulars | GST applicable/ exemption |
|---|---|
Specified goods covered within the term ‘Pre-packaged and labelled’ | GST applicable |
Specified goods not covered within the term ‘Pre-packaged and labelled’ | GST exempt |
The following table illustrates the list of specified goods (along with HSN) which are taxable under GST if covered within the term ‘pre-packaged and labelled’
HSN code | Description of goods | GST rates |
|---|---|---|
0202/ 0203/ 0204/ 0205/ 0206/ 0207/ 0208/ 0209/ 0210 | Meat & edible meat offal | 5% |
0303/ 0304/ 0305/ 0306/ 0307/ 0308/ 0309 | Fish & crustaceans, molluscs & other aquatic invertebrates | 5% |
0403 | Curd/ Lassi/ Butter milk | 5% |
0406 | Chena/ paneer | 5% |
0409 | Natural honey | 5% |
0504 | Guts/ bladders & stomach of animals [other than fish]/ whole & pieces thereof/ fresh/ chilled/ frozen/ salted/ in brine/ dried/ smoked | 5% |
0713 | Dried leguminous vegetables, shelled [whether or not skinned/ split] | 5% |
0714 | Manioc/ arrowroot/ salep/ Jerusalem/ artichokes/ sweet potatoes and similar roots & tubers with high starch/ inulin content, frozen [whether or not sliced/ in the form of Pellets] | 5% |
08 | Dried makhana [whether or not shelled/ peeled] | 5% |
1001 | Wheat & meslin | 5% |
1002 | Rye | 5% |
1003 | Barley | 5% |
1004 | Oats | 5% |
1005 | Maize Corn | 5% |
1006 | Rice | 5% |
1007 | Grain sorghum | 5% |
1008 | Buckwheat/ millet & canary seed/ other cereals such as Jawar, Ragi, Bajra | 5% |
1101 | Wheat/ meslin flour | 5% |
1102 | Cereal flours other than wheat/ meslin/ maize flour, Rye flour etc. | 5% |
1103 | Cereal groats, meal & pellet | 5% |
1105 | Flour/ powder/ flakes/ granules/ pellets of potatoes | 5% |
1106 | Flour of-
| 5% |
1701/1702 | Jaggery of all types [including Cane jaggery i.e. gur/ palmyra jaggery], Khandsari sugar | 5% |
1904 | Puffed rice [commonly known as Muri], flatted or beated rice [commonly known as Chira], parched rice [commonly known as khoi], parched paddy/ rice coated with sugar/ gur [commonly known as Murki] | 5% |
3101 | Animal/ vegetable fertilizers [whether or not mixed together/ chemically treated], fertilizers by mixing or chemical treatment of animal/ vegetable products & organic manure | 5% |
53 | Coir pith compost | 5% |
2009 89 90 | Tender coconut water | 12% |
Read all related article thoroughly speaks on GST applicability:
FAQs on GST applicability on 'pre-packaged and labelled Goods'
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Post going through all the above amendments, it is important to go through important clarifications as provided vide FAQs issued by the Government on 17th July 2022. The same is explained hereunder
- GST applicability when a single package has a quantity of more than 25 kg/ 25 litre
A single package of items like cereals, flour, pulses, etc. which contains a quantity of more than 25 kg/ 25 litre will not fall within the category of ‘pre-packaged and labelled’ commodity and hence the same will be exempt under GST. - GST applicability when retail packages (say for example – 10 retail packs of 10 kg each) are supplied in single package
Since the retail packs are meant for eventual sale to the retail consumers, GST will be applicable on the supply of a single package which contains several retail packs. - Stages when GST will be applicable in case of pre-packaged and labelled commodities
In the case of ‘pre-packaged and labelled’ commodities supply, GST will be applicable in the following stages-
- Manufacturer supplying to distributors;
- Distributors supplying to dealers;
- Dealers supplying to retailers; and
- Retailers supplying to individual consumers.
Importantly, on satisfying the input tax credit provisions/ conditions, the input tax credit under GST will be eligible to the manufacturers, wholesalers, retailers, etc.
Further, if the supplier is availing of either threshold exemption or benefit under the composition scheme. Then, in such a case, the same will be available to the eligible supplier in the usual manner.
- GST applicability of retailers selling in loose quantities
Particulars | GST Taxability/ exemption |
|---|---|
Goods purchased by the retailers from the manufacturer/ distributor/ dealers | If the goods are covered within the ambit of ‘pre-packaged and labelled’ commodities, GST will be applicable on the same. |
Goods sold by the retailers to the individual consumers in loose quantity | Supply of commodity in loose quantity is not supply of pre-packaged commodity for the purpose of GST and hence GST will not be applicable on the same. |
- GST applicability when pre-packaged and labelled commodity is supplied for industrial/ institutional consumption
As per rule 3(c) of the Legal Metrology (Packaged Commodities) Rules, 2011, pre-packaged and labelled commodities when supplied to industrial consumers or institution consumers, the same is excluded from the ambit of the Legal Metrology Act.
Accordingly, as the supply is outside the purview of the Legal Metrology Act, the same, for the purpose of GST, will not be covered within the term ‘pre-packaged and labelled’. Accordingly, GST will be exempt when a pre-packaged and labelled commodity is supplied for industrial consumption or institutional consumption. - Miscellaneous clarifications-
- GST will be applicable in case the rice millers, not making the required declaration, however, selling packages which contain 20 kg of rice.
- Legal Metrology Act and rules thereunder prescribe some criteria satisfying which the supply will be excluded. Accordingly, such excluded commodities will not be treated as ‘pre-packaged and labelled’ for the purpose of GST and hence GST will be exempt.
- Rule 26 of the Legal Metrology (Packaged Commodities) Rules, 2011 prescribes certain exemption. Accordingly, such exempted commodities will not be treated as ‘pre-packaged and labelled’ for the purpose of GST and hence GST will be exempt.
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