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The GST Council in the 47th Meeting held recently has made several recommendations, one of such recommendation is related to change as regards unbranded specified food items.

The same is discussed with background as follows :–

At present specified food items are exempted from GST if the same are unbranded or where the right on the brand is foregone by the supplier by way of declaration.

This position was as per the press release issued in consequence of the 21st GST Council  meeting held on 9th September, 2017.

Notification Nos. 27/2017-central tax(rate), 28/2017-central tax(rate), 27/2017-Integrated tax(rate), 28/2017-Integrated tax(rate), 27/2017-Union territory tax(rate), 28/2017-Union territory tax(rate), giving effect to the Council’s recommendations relating to changes in GST rates on goods and conditions appended thereto were issued on 22nd September, 2017 and were made effective from the same date.

By the effect of amendment brought by these notifications the original expression of “put up in unit container and bearing a registered brand name” was substituted that it should be put in unit container and may be bearing a registered brand name or bearing a brand name on which an actionable claim or enforceable right in a court of law is available. Thus, from the previous requirement, the new expanded requirement was of  either bearing registered brand name or bearing a brand name on which actionable claim or enforceable right in a court of law is available. Thus, the requirement of the brand name being registered was no longer necessary.

These notifications, interalia, provided that 5% GST will apply on cereals, pulses and flours etc. if on brand name an actionable claim or enforceable right in court of law is available. These notifications also provided that this GST will, however, not apply if the person concerned voluntarily foregoes any actionable claim or enforceable right on such brand name, subject to the conditions that he:

1. Files an affidavit to the effect that he is voluntarily foregoing his actionable claim or enforceable right on such brand name with the jurisdictional Commissioner of Central Tax or State Tax, or the jurisdictional officer of Union Territory Tax, as the case may be, and

2. Prints in indelible ink, both in English and local language on each such unit container, that in respect of brand name printed on the unit containers he has voluntarily foregone his actionable claim or enforceable right.

Majority of the suppliers of such food item were availing the aforesaid exemption by fulfilling both the above mentioned conditions and only those big brands who were not inclined to forego actionable claim or enforceable right in their brand name were paying applicable GST.

However there were few instances were supply was made without fulfilling both the conditions of Notification Nos. 27/2017-central tax(rate) and without paying applicable GST.

GST on Pre-packaged, Pre-labelled Cereals, Pulses, Flours & other Food Items

In the case of Sarvasiddhi Agrotech Pvt. Ltd. v. Union of India & Others reported in (2021) 5 GSTJ Online 30(Tripura) the supplier was supplying rice in unit containers bearing brand name such as Sarvasiddhi Argotech Pvt. LTd., ‘Aahar Normal’, ‘Aahar Gold’ and ‘Aahar Premium’. Such supplies were made without proper declaration of foregoing the actionable claim or enforceable right in respect of the brands in question and therefore authorities levied tax with interest and penalty which was confirmed by the High Court.

The GST council in its 47th meeting held recently has recommended to revise the scope of exemption from GST to exclude the specified food items if the following conditions are satisfied :-

1. Supplies are pre-packed and

2. Supplies are pre-labelled and

3. Retail pack in terms of Legal Metrology Act.

As per Section 2(l) of The Legal Metrology Act, 2009 “pre-packaged commodity” means 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

As per Section 2(f) of The Legal Metrology Act, 2009 “label” means any written, marked, stamped, printed or graphic matter affixed to, or appearing upon any pre-packaged commodity

As per Rule 2(k) of the The Legal Metrology (Packaged Commodities) Rules, 2011 “retail package” means the packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages.

Provided that for the purposes of this clause, the expression ‘ultimate consumer’ shall not include industrial or institutional consumers.

Similarly, the Food Safety and Standards (Packaging and Labelling) Regulations, 2011 says, “Prepackaged” or “Pre-packed food”, means food, which is placed in a package of any nature, in such a manner that the contents cannot be changed without tampering it and which is ready for sale to the consumer. Pre-labelled means a pre-packed food item need to have label regarding contents, etc with a registered or unregistered brand.

However it is worth mentioning here that in the press release dated 29th June 2022 Specific reference to the Legal Metrology Act is drawn.

As per Rule 3 of The Legal Metrology (Packaged Commodities) Rules, 2011 provisions applicable to packages intended for retail sale are not applicable on:

(a) packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags up to 50 kg; and

(b) packaged commodities meant for industrial consumers or institutional consumers.

As per rule 26(d) the Legal Metrology (Packaged Commodities) Rules, 2011 are not applicable on agricultural form produces in packages of above 50 kg.

However it will be interesting to see that when the notifications giving effect to the decisions of 47th GST Council meeting are issued then only the definitions of terms like  “pre-packaged commodity” , “label” and “retail package” are borrowed from Legal Metrology Acts and Rules or other applicability restrictions and exemptions are also made available.

Clarity on various issues is needed, hope it will come by way of official notifications which are not available as on date.

It is certain that if levy of tax is confirmed by notification it will consequently increase the prices of such food items and will result in additional burden on consumers.

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