Introduction
In our country wheat flours are generally categorized by how much of the grain is stripped away. Usually wheat powder/flour means ‘whole grain’ (mixture of germ, endosperm and bran), the major variants of which are atta, maida and sooji/rawa. Atta flour denotes mixture of endosperm and bran, maida flour is endosperm, bleached; a very white flour, similar to the American bleached flour. Sooji/rawa is coarse-ground endosperm. As the name suggests, maida or all-purpose flour is highly refined. This is the reason why atta is so much coarser to the touch, while maida is smooth and fine. While you can easily get whole wheat grains and get them milled locally, the refining process for maida can only be done at specialized mills and factories. When it comes to nutrition, whole grains are considered to be the healthiest options because they’re packed with dietary fiber, proteins, healthy carbohydrates, vitamins, minerals and loads of antioxidants. Whole wheat flours that are milled just once are the next best thing, so atta is still packed with fiber, proteins, minerals, vitamins, antioxidants and, of course, carbohydrates. Maida, on the other hand, is super-refined, a multi-level process that sheds all the fiber, proteins, minerals, vitamins and antioxidants from it. What you’re left with is pure carbohydrate. According to nutrients Maida has refined or simple carbohydrates and very low amounts of other nutrients, which is really harmful to our body. Since, Sooji/Rawa (Semolina) is made using durum wheat, it is not highly refined or processed, which makes it healthy. It is rich in healthy carbohydrates, iron, calcium, magnesium, zinc, phosphorus, vitamin B and other vital nutrients.
In this article, in fact I am not concerned with nutritional value of atta, maida or sooji/rawa but with their applicable rate of tax under the GST laws, when they supplied unbranded, in unit containers or as branded.
Wheat Flour in the GST era
1) To begin with, we have to refer Sl No. 54 of the Notification No.1/2017 – Central Tax (Rate) dated: 28.06.2017, by which wheat or meslin flour put up in unit container and bearing a registered brand name (HSN Code 1101) attracts tax @ 5 % (CGST + SGST) whereas as per Sl No. 73 of the Notification No.2/2017 – Central Tax (Rate) dated: 28.06.2017, wheat or meslin flour, other than those put up in unit container and bearing a registered brand name (HSN Code 1101) is exempted from tax under the GST Acts.(Meslin is a mixture of wheat and rye that is sown and harvested together. In trade it is usually classified with wheat. Rye is a type of grain, the seeds of which are used to make flour or whisky or to feed animals).
2) Explanation given below to Notification No.1/2017 – Central Tax (Rate) as well as below to Notification No.2/2017 – Central Tax (Rate) says that,
Explanation. – For the purposes of this Notification
(i) The phrase “unit container” means a package, whether large or small (for example, tin, can, box, jar, bottle, bag, or carton, drum, barrel, or canister) designed to hold a pre-determined quantity or number, which is indicated on such package.
(ii) The phrase “registered brand name” means brand name or trade name, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person, and which is registered under the Trade Marks Act, 1999.
3) While so, Notification No.27/2017 – Central Tax (Rate) dated: 22.09.2017 was issued by which the following amendments were brought in to Notification No.1/2017 – Central Tax (Rate);
In the said notification (ie- Notification No.1/2017), – (A) in Schedule I-2.5%, –
(i) against serial numbers 11, 13, 25, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 58 and 59, in column (3), for the words “put up in unit container and bearing a registered brand name”, the words, brackets and letters “put up in unit container and, –
(a) bearing a registered brand name; or
(b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as in the ANNEXURE]”, shall be substituted;
The Annexure inserted as per this Notification is extracted as below;
“ANNEXURE
For foregoing an actionable claim or enforceable right on a brand name,- (a) the person undertaking packing of such goods in unit containers which bear a brand name shall file an affidavit to that effect with the jurisdictional commissioner of Central tax that he is voluntarily foregoing his actionable claim or enforceable right on such brand name as defined in Explanation (ii)(a); and (b) the person undertaking packing of such goods in unit containers which bears a brand name shall, on each such unit containers, clearly print in indelible ink, both in English and the local language, that in respect of the brand name as defined in Explanation (ii)(a) printed on the unit containers he has foregone his actionable claim or enforceable right voluntarily.”.
4) In the Explanation, for clause (ii), the following shall be substituted, namely: –
“(ii)(a) The phrase “brand name” means brand name or trade name, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person.
(b) The phrase “registered brand name” means,-
(A) a brand registered as on the 15th May, 2017 under the Trade Marks Act, 1999. irrespective of whether or not the brand is subsequently deregistered;
(B) a brand registered as on the 15th May, 2017 under the Copyright Act, 1957(14 of 1957;
(C) a brand registered as on the 15th May,2017 under any law for the time being in force in any other country.”;
5) Thus, through Notification No.27/2017 – Central Tax (Rate), drastic changes were introduced with regard to the rate of tax of wheat flour/meslin flour, especially regarding the branded goods. In fact, the scope and ambit of the word “branded” is widened. For a quick assimilation of the situation, scenario before and after the introduction of Notification No.27/2017 – Central Tax (Rate) is illustrated below.
GST rates before the introduction of Notification No.27/2017 – Central Tax (Rate)
6) As envisaged under Sl No. 54 of the Notification No.1/2017 – Central Tax (Rate) dated: 28.06.2017, wheat or meslin flour put up in unit container and bearing a registered brand name was taxable @ 5 % (CGST @ 2.5% + SGST @ 2.5%) whereas other than those put up in unit container and bearing a registered brand name attracts no tax under the GST acts. The phrase “unit container” means a package, whether large or small (for example, tin, can, box, jar, bottle, bag, or carton, drum, barrel, or canister) designed to hold a pre-determined quantity or number, which is indicated on such package. The phrase “registered brand name” means brand name or trade name, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person, and which is registered under the Trade Marks Act, 1999.
7) Thus to attract tax, wheat flour should have sold in unit containers as defined above and also with a registered brand name (both conditions to be satisfied). Here, registered brand name means a name or a mark, such as symbol, monogram, label, signature or invented word or writing, registered under the Trade Marks Act, 1999.
GST rates after the introduction of Notification No.27/2017 – Central Tax (Rate) dated: 22.09.2017
8) With the introduction of the above notification, wheat floor attracts tax @ 5 % (CGST @ 2.5% + SGST @ 2.5%), if supplied “put up in unit container and,
a) bearing a registered brand name; or
(b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as in the ANNEXURE]”, shall be substituted;
9) Even after the said Notification came into force there is no change in the definition of the term “unit container”. However, there is substantial changes in the scope and meaning of brand name for the purpose of taxation in respect of wheat Flour/muslin items. In the light of Notification No.27/2017 – Central Tax (Rate) dated: 22.09.2017, applicability of GST to wheat/muslin flour such as atta, maida & sooji/rawa is summerised as under;
a) Wheat flour supplied in unit containers with a “registered brand name” is taxable @ 5 % (2.5%+2.5%). Here “registered brand name” means (A) a brand registered as on the 15th May, 2017 under the Trade Marks Act, 1999, irrespective of whether or not the brand is subsequently deregistered (B) a brand registered as on the 15th May, 2017 under the Copyright Act, 1957(14 of 1957; (C) a brand registered as on the 15th May,2017 under any law for the time being in force in any other country.”;
b) Wheat flour supplied in unit containers and also bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those described in the next para) attracts GST @ 5 % (2.5%+2.5%).
c) Wheat flour supplied in unit containers and also bearing a brand name but any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, then it is exempted from levy of GST. The procedure for foregoing an actionable claim or enforceable right on a brand name is (a) to file an affidavit to that effect with the jurisdictional commissioner of Central tax that he is voluntarily foregoing his actionable claim or enforceable right on such brand name as defined in Explanation (ii)(a); and (b) on each such unit containers, clearly print in indelible ink, both in English and the local language, that in respect of the brand name as defined in Explanation (ii)(a) printed on the unit containers he has foregone his actionable claim or enforceable right voluntarily.
10) In contrast, supply of wheat flour/muslin flour is exempted from GST in the following circumstances;
a) Wheat flour/muslin flour supplied not in unit containers, unbranded.
b) Wheat flour/muslin flour supplied not in unit containers but having brand name, trade name, or a name or a mark, such as symbol, monogram, label, signature or invented word or writing which can identify the supplier (This is largely an imaginary situation since it is almost not usual or practical to supply goods with brand name but not in unit containers)
c) Wheat flour /muslin flour supplied in unit containers but has no brand name, trade name, or a name or a mark, such as symbol, monogram, label, signature or invented word or writing which can identify the supplier.
d) Wheat flour supplied in unit containers and also bearing a brand name, trade name, or a name or a mark, such as symbol, monogram, label, signature or invented word or writing which can identify the supplier, but any actionable claim or any enforceable right in respect of such brand name/trade name has been voluntarily foregone.
Conclusion
From the above discussions, now it is manifestly clear that, exemption can be claimed on wheat/muslin flour such as atta, maida & sooji/rawa under limited circumstances only, under the GST Acts. Supply of these items in unit containers or not in unit containers having no brand name is exempt whereas supply in unit containers with any brand attracts tax @ 5 %(2.5%+2.5%). Bear in mind that, here the term “brand name” has wide meaning and connotations. A brand registered as on the 15th May,2017 under the Trade Marks Act, 1999 or under the Copyright Act, 1957 or a brand name registered as on the 15th May,2017 under any law for the time being in force in any other country will attracts GST @ 5%(2.5%+2.5%). A brand name registered under the Trade Marks Act, 1999 as on the 15th May,2017 but subsequently deregistered will not make the goods exempt. However, if the supplier declares that he is willing to forego voluntarily the unregistered brand name used by him, exemption can be claimed subject to the condition that this has to be declared before the jurisdictional commissioner and to be declared on each unit container for supply. Needless to say, much litigation has already been taken place in respect of the statutory prescriptions discussed above. For example, by Order No. ARA-13/2017/B/23.03.2018 the Appellate Authority for Advance Ruling, Maharashtra has dismissed the contention raised by Aditya Birla Retail Ltd (using brand name like ‘More’) that the declaration mentioning the name and registered address of the manufacturer on unit containers as per the statutory requirement under various Acts like Food Safety and Standards Act,2006 does not attract tax goods like wheat flour.
Author/Blogger: Aji V. Dev, Advocate, High Court of Kerala at Aji V. Dev & Associates, Ernakulam, Kochi, available at ajivdev@yahoo.co.in/advajivdev@gmail.com/9447788404.
Author Bio
Veer well researched and written. Congratulations and thanks. But it shows how simple our tax laws are!