Pre-Packed, Labelled Pulses, Flour Up To 25 Kg To Attract 5% GST From Today, Clarifies Govt

It means that single packages of unbranded pre-packed and labelled food items like cereals, pulses and flour weighing more than 25 kg will remain exempted from 5 per cent GST levy

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New Delhi: In a bid to clarify the GST rate hike on single packages of unbranded pre-packed and labelled food items, the Central Board of Indirect Taxes and Customs on Sunday said only pre-packed items up to 25 kg will attract 5 per cent GST from today. However, a retail shopkeeper who supplies in loose quantity the item bought from a manufacturer or a distributor in a 25-kg pack, such sale to consumers will not attract GST, reported news agency PTI.

It means that single packages of unbranded pre-packed and labelled food items like cereals, pulses, and flour weighing more than 25 kg will remain exempted from 5 per cent GST levy. The clarification came in form of FAQs regarding various doubts after the government had notified that unbranded pre-packed and labelled food items would attract 5 per cent Goods and Services Tax from July 18. As of now, only branded items attract GST.

How will pre-packaged and labelled food items be taxed?

As per the FAQs, 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).

"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 the pre-packaged and labelled commodity for the purposes of GST and would therefore not attract GST," it said.

Also, note that GST would apply on a package that contains multiple retail packages, for example, a package containing 10 retail packs of flour of 10 kg each, said CBIC.

“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. Such package may be sold by a manufacturer through distributor. These individual packs of 10 kg each are meant for eventual sale to the retail consumer,” the CBIC said.

On the other hand, a package for instance of rice containing 50 kg (in one individual package) would not be considered a pre-packaged and labelled commodity for the purposes of GST levy, it added.

GST would apply when pre-packaged and labelled package is 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, retailer supplies the item in loose quantity from such package, such supply by retailer is  not a supply of packaged commodity for the  purpose of GST levy,” the CBIC said.

It noted that for the purpose of GST,  pre-packaged commodity would mean 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 pre-determined quantity. Any such supply which requires declaration under the Legal Metrology act would attract GST, it said. 

Will it lead to fuel price inflation?

The new levy is expected to fuel price inflation of basic consumable items of food like rice and cereals from today itself, the PTI report quoted Rajat Mohan, AMRG & Associates Senior Partner as saying.

The GST Council, chaired by Union finance minister and comprising state FMs, had last month decided that prepacked and labelled food items would attract 5 per cent GST from July 18.