In a significant ruling, the Authority for Advance Ruling (AAR) in West Bengal, responding to an application by Mr. Tamal Kundu, has clarified the GST status of unbranded and non-packaged Broken Rice. The decision, dated September 13, 2023, brings clarity to the taxation of Broken Rice under the provisions of Notification No. 07/2022-Central Tax (Rate) and related guidelines.
The AAR, West Bengal, in the case of In Re: Tamal Kundu[WBAAR 18 of 2023 dated September 13, 2023], held that as per Notification No. 07/2022-Central Tax (Rate) dated July 13, 2022, (Notification) and Press Release dated July 18, 2022 (Press Release) on subject matter “FAQ on GST applicability on pre-packaged and labelled goods” (“FAQ”); GST is not leviable on sale of unbranded/non packaged Broken Rice.
Facts:
Mr. Tamal Kundu, (“the Applicant”) entered into agreement for custom milling of paddy with the State Government. The Applicant directly procures the paddy from the farmers. The Paddy is further processed, generating around 68 Kg of rice from one quintal of paddy. During the production of rice, two percent rice is damaged during the polishing stage, termed as Broken Rice, The Broken Rice produced, is sold in unbranded and unpackaged manner, generally used for Animal Feeding.
Thereafter, the Applicant filed an Advance Ruling Application (“the Application”) raising the question whether GST is to be charged at the rate of five percent on sale of unbranded/non packaged Broken Rice generated from the manufacturing process?
Issue:
Whether GST is leviable on the sale of unbranded/non-packaged Broken Rice?
Held:
The Hon’ble AAR, West Bengal, in WBAAR 18 of 2023 held as under:
- Noted that, the Broken Rice would be classifiable under Chapter Heading 1006 and same rate would be applicable as in case of supply of rice.
- Further noted that, the Notification exempts the supply of Rice which is in other than pre-packaged and labelled form with effect from July 18, 2022.
- Further Noted that, as per the Press Release and FAQ it was clarified that, the food items such as pulses, cereals like rice, wheat flour etc.), supply of specified pre=packaged food article would fall within the purview of definition of “pre-packaged commodity” under Legal Metrology Act. Also, the supply of packaged commodity for industrial use would not come within the purview of Legal Metrology Act. Therefore, the aforementioned goods packaged and labelled in abovesaid manner would not be considered as pre-packaged and pre-labelled for levying of GST.
- Opined that, the Applicant is liable to pay tax at the rate of five percent on supply of “broken rice” if supplied in pre-packaged and labelled form. If not, then such supply is exempted from payment of tax.
- Held that, tax is not payable by the Applicant on supply of broken rice if supplied in other then pre-packaged and labelled form as stated in the Notification.
Conclusion: The AAR West Bengal’s ruling provides clarity on the GST treatment of unbranded and non-packaged Broken Rice, reinforcing that such supplies are exempt from GST as per the prevailing Notification. This decision is essential for businesses involved in the production and sale of Broken Rice, offering a clear understanding of the taxation implications associated with the packaging and labeling of this commodity.
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