The latest changes relating to GST recommended in the 47th GST council meeting, came into effect from 18th of July.
The Central Board of Indirect Taxes and Customs issued a set of FAQs on Sunday night, just before when new GST rates will be applicable to specified products. This move is seen as an attempt to clarify the scene of ambiguity regarding the news decision.
As per the decision implemented by CBIC, food items like cereals, pulses, flour along with curd, lassi, paneer weighing up to 25 kg/litre will be considered as ‘pre-packaged and labelled’, and shall be liable to five per cent GST, with effect from 18th of July.
CBIC stated that if a retail shopkeeper sells loose items bought from a manufacturer or dealer in a pack of 25kg/litre, then that shall be exempted from the purview of GST.
CBIC also clarified that a single package of 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. Along with this clarifications, it also made clear that single packages of unbranded and labelled food items like cereals, pulses, flour etc will be liable for the exemption when weighing in excess to 25kg/litre.
For example, pre-packaged atta of 25kg meant for retail sale to the consumer shall be liable to GST, however sale of 30kg atta pack shall be exempted from levy of GST.
We should be seeing up some of the basic question that arises from the decision:
What is the scope of ‘pre- packaged and labelled’ for the purpose of GST levy on food items like pulses, cereals, and flours?
Pre-packaged and labelled food items (such as pulses, cereals like rice, wheat, flour etc), would fall within the purview of the definition of ‘pre-packaged commodity’ under the Legal Metrology Act, 2009, if such packages contain a quantity up to 25 kilogram (or 25 litres).
Will GST apply to a package that contains multiple retail packages? For example, a package containing 10 retail packs of flour of 10 Kg each?
Yes, if several packages intended for retail sale to the ultimate consumer, say 10 packages of 10 Kg each, are sold in a larger pack, then GST would apply to such supply.
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.
GST would also apply when pre-packaged and labelled packages are sold by a distributor/ manufacturer to a retailer purchasing food items in packages weighing up to 25 kg/25 litre. However, if for any reason, the retailer supplies the item in loose quantity from such a package, such supply by the retailer will not be a supply of packaged commodities for the purpose of GST levy, the CBIC said.
At what stage would GST apply on such supplies, i.e., whether GST would apply on specified goods sold by manufacturer/producer to wholesale dealer who subsequently sells it to a retailer?
GST would apply whenever a supply of such goods is made by any person, i.e. manufacturer supplying to distributor, or distributor/dealer supplying to retailer, or retailer supplying to individual consumer. Further, the manufacturer/wholesaler/retailer would be entitled to input tax credit on GST charged by his supplier in accordance with the Input Tax Credit provisions in GST, as clarified by CBIC.
Whether tax is payable if such goods are purchased in packages of up to 25 kg/25liters by a retailer, but the retailer sells it in loose quantities in his shop for any reason?
GST applies when such goods are sold in pre- packaged and labelled packs. Therefore, GST would apply when pre-packaged and labelled packages are sold by a distributor/ manufacturer to such retailers. However, if for any reason, the retailer supplies the item in loose quantity from such a package, such supply by retailer is not a supply of packaged commodity for the purpose of GST levy.
Whether tax is payable if such packaged commodities are supplied for consumption by industrial consumers or institutional consumers?
Supply of packaged commodity for consumption by industrial consumer or institutional consumer is excluded from the purview of the latest update and won’t be considered as pre-packaged and labelled for the GST collection.
Question and queries are prepared with the help of offical clarification put forward by department.
A lot of buzz is going around this in the market and the decision is sure to increase the inflation for the daily products as well along with the global inflation crisis, according to some media reports it can affect the unorganised market in the daily consumable goods segment.
As a lot of these products are sold in India’s 3rd tier and rural market, also some of them in major cities of the country, it will make the market more friendly towards organized and big players.
