Tax Research Unit (TRU) has issued FAQs dated 17.07.2022 dealing with certain aspects in respect of the imposition of GST on ‘pre-packaged and labelled’ food items w.e.f. 18.07.2022. The key highlights of the FAQs are as follows:

1. The essential change from 18.07.2022 is to change the modalities of imposition of GST on specified food items from branded specified goods to “pre-packaged and labelled” specified goods.

2. Specified commodities supplied in a package that do not require declaration(s)/ compliance(s) under the Legal Metrology Act, 2009, and the rules made thereunder, would not be treated as pre-packaged and labelled for the purposes of GST levy and hence shall continue to be exempt.

3. 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.

4. 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. A manufacturer may sell such a package through the distributor. 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, even if rule 24 of Legal Metrology (Packaged Commodities) Rules, 2011, mandates certain declarations to be made on such wholesale package.

5. If for any reason, the retailer supplies the item in loose quantity from such package, such supply by the retailer is not a supply of packaged commodity for the purpose of GST levy.

6. Supply of packaged commodities for consumption by industrial consumers or institutional consumers will not be considered as pre-packaged and labelled for the purposes of GST levy.

7. Even if the supplier violates the provisions of the legal metrology Act and the Rules in terms of not making the declaration where required, such packages would be considered as pre-packaged and labelled commodities for the purposes of GST as it requires making a declaration and hence will attract GST.

8. GST shall not be attracted on packages that are covered by the exemptions under rule 26 of Legal Metrology (Packaged Commodities) Rules, 2011.

We opine that the given FAQs are in line with the intent of the GST Council.

Clarification in respect of packages covered under Rule 24 (wholesale packages) not attracting GST is welcome. It is however advisable for the Government to incorporate this aspect by way of amending the notification to ensure absolute clarity.

The trade and industry are suggested to ensure proper record keeping to justify the claim of exemption going forward.

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