1. Certain specified food products, as well as animal or vegetable fertilizers, hitherto enjoyed exemption from GST subject to the conditions that:-

(a) the same is not put up in the unit container and

(b) the same does not bear a registered brand name or 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 enforceable right in respect of such brand name has been foregone voluntarily] subject to the condition that the supplier in question submits an affidavit to that effect that he is voluntarily foregoing his actionable claim or enforceable right on such brand name and mentions the said assertion on the packing material in indelible ink.

2. Now w.e.f. 18.07.2022 the said products shall continue to enjoy the exemption (refer to Notification No. 7/2022-CT (Rate) dt. 13.07.2022 issued in exercise of powers u/s 11(1) of the CGST Act, 2017 amending the parent exemption notification no. 2/2017 – CT (Rate)) subject to the new conditions that:-

(a) the same is not pre-packaged and labelled

3. In other words, the specified products that are pre-packaged and labelled shall be liable to GST w.e.f. 18.07.2022. Hence at this stage, it can be seen that the amending exemption notification has replaced the earlier conditions of ‘unit container’ and ‘brand name’ with the new conditions of ‘pre-packaged and labelled’. The list of the products in question undergoing the change in the exemption conditions is annexed as Exhibit A of this document.

4. Now the moot question to understand is the meaning of the expression ‘pre-packaged and labelled’. The amending Notification supra adds the following Explanation by way of substituting the existing clause (ii) with the following clause:

“The expression ‘pre-packaged and labelled’ means a ‘pre-packaged commodity’ as defined in clauses (l) of section 2 of the Legal Metrology Act, 2009 (1 of 2010) where, the package in which the commodity is pre-packed or a label securely affixed thereto is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 (1 of 2010) and the rules made thereunder.”

5. The above Explanation, therefore, defines the expression ‘pre-packaged and labelled’ by referring to the provisions of the Legal Metrology Act, 2009 read with the rules made thereunder. It provides for two factors to be fulfilled so as to the considered as ‘pre-packaged and labelled’ viz.:

(a) That the commodity is a ‘pre-packaged commodity’ and

(b) That the ‘pre-packaged commodity’ is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 (1 of 2010) and the rules made thereunder

6. Before we discuss provisions of the Legal Metrology Act, 2009 we submit that the said Act establishes and enforces standards of weights and measures, regulates trade and commerce in weights, measures and other goods which are sold or distributed by weight, measure or number and connected matters with an intent to protect the interest of the consumers.

7. Now we shall first refer to the definition of the ‘pre-packaged commodity’ as defined u/s 2(l) of the Legal Metrology Act, 2009. The same is as under:

“(l) “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;”

8. Hence “pre-packaged commodity” would be the commodity that:-

(a) has been placed in a package of whatever nature, whether sealed or not;

(b) so that the product contained therein has a pre-determined quantity;

(c) and such product is placed in the given package without the purchaser being present.

9. Hence at this stage, it may be noted that the aforesaid definition does not differentiate between a “pre-packaged commodity” meant for retail sale or wholesale.

10. In addition to the above even if the given commodity is considered as a “pre-packaged commodity” still as per clause (ii) supra the same will not qualify for exemption only if the package in which the commodity is pre-packed or a label securely affixed thereto is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 (1 of 2010) and the rules made thereunder.

11. Hence one has to now consider the conditions under the provisions of the Legal Metrology Act, 2009 and the rules made thereunder that mandate the affixation of the declarations.

12. Now Sec. 18 of the Legal Metrology Act, 2009 contains the provisions related to the affixation of the declarations. Sec. 18(1) provides as under:

“No person shall manufacture, pack, sell, import, distribute, deliver, offer, expose or possess for sale any pre-packaged commodity unless such package is in such standard quantities or number and bears thereon such declarations and particulars in such manner as may be prescribed.”

13. The aforesaid provisions, therefore, provide that the person cannot undertake the given activities (i.e. manufacture, sell, etc.) in respect of any pre-packaged commodity for sale unless such package is in such standard quantities or number and bears thereon such declarations and particulars in such manner as may be prescribed. Hence the said provisions prohibit the persons from dealing with any pre-packaged commodity unless it bears certain declarations and particulars as may be prescribed by way of Rules.

14. This now brings us to the relevant Rules. One has to consider the Legal Metrology (Packaged Commodities) Rules, 2011 as amended to date. Rule 2 of the said Rules contains various definitions of the expressions used in the Rules. Chapter II of the said Rules (covering Rule 3 to 23) deals with provisions applicable to packages intended for retail sale. Chapter III of the said Rules (covering Rule 24) deals with the provisions applicable to wholesale packages. Chapter IV (Rule 25) deals with the export of packaged commodities. Chapter V (Rule 26) deals with exemptions. Chapter VI (Rule 27 to 30) deals with the requirement of registration of manufacturers, packers and importers. Chapter VII (Rule 31 to 34) deals with other residual provisions. We therefore must first consider the exemptions available under Rule 26. The same is as under:

Nothing contained in these rules shall apply to any package containing a commodity if— 

(a) the net weight or measure of the commodity is ten gram or ten millilitre or less, if sold by weight or measure:

 [Provided that the provisions of this clause shall be applicable for tobacco and tobacco products.] 

(b) any package containing fast food items packed by restaurant or hotel and the like; 

(c) it contains scheduled formulations and non-scheduled formulations covered under the Drugs (Price Control) Order, 2013 made under section 3 of the Essential Commodities Act, 1955 (10 of 1955): 

Provided that no exemption shall be applicable to medical devices declred as drugs.] 

(d) [***]

(e) any thread which is sold in coil to handloom weavers.

15. Hence at this stage, we can opine that the hitherto exempted products also falling within the aforesaid exemptions shall continue to enjoy the exemption under GST since the said products have been exempted from making any declarations under the provisions of the Legal Metrology Act, 2009 and the rules made thereunder and hence shall not be considered to be ‘pre-packaged and labelled’ under clause (ii) of the GST notification supra.

16. Now Rule 3 of the said Rules also provides that the provisions applicable to packages intended for retail sale shall not apply to the following categories:-

(a) packages of commodities containing quantity of more than 25 kilogram or 25 litre;

(b) cement, fertilizer and agricultural farm produce sold in bags above 50 kilogram; and

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

17. In other words, the provisions contained under Chapter II of the Rules shall not apply to the aforesaid categories. The expression ‘retail sale’, ‘industrial consumers’ and ‘institutional consumers’ has been defined under Rule 2 as under:

(l) “retail sale”, in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales shops, agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer;

(bb) “industrial consumer” means the consumer who buys packaged commodities directly from the manufacturer or from an importer or from wholesale dealer for use by that industry and the package shall have declaration ‘not for retail sale’;

(bc) “institutional consumer” means the institution which buys packaged commodities bearing a declaration ‘not for retail sale’, directly from the ‘manufacturer or from an importer or from wholesale dealer for use by that institution and not for commercial or trade purposes;

GST Rates on Food Products - Pre-Packaged And Labelled

18. Hence the supplies of the hitherto exempted goods falling under the aforesaid exempted categories shall not be required to bear the declarations in accordance with Chapter II of the Rules. Can it, therefore, be said that the said categories are not ‘pre-packaged and labelled’ under clause (ii) of the GST notification supra and hence shall still be entitled to exemption under GST?

19. It must be noted that the expression ‘pre-packaged and labelled’ has been defined in the amending Notification supra to mean a ‘pre-packaged commodity’ as defined in clauses (l) of section 2 of the Legal Metrology Act, 2009 where, the package in which the commodity is pre-packed or a label securely affixed thereto is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 and the rules made thereunder. Hence the requirement of the ‘pre-packaged commodity’ bearing the declaration applies to the ‘package’ or the ‘label’ securely affixed to such ‘package’.

20. Now Chapter III of the said Rules (covering Rule 24) deals with the provisions applicable to wholesale packages (that can also be a “pre-packaged commodity” u/s 2(l) of the Legal Metrology Act, 2009 if it has a pre-determined quantity and packed without the presence of the purchaser) and provides for certain declarations on such packages. The expression “wholesale package” has been defined u/r 2(r) as under:

(r) “wholesale package” means a package containing—

(i) a number of retail packages, where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer; or

(ii) a commodity sold to an intermediary in bulk to enable such intermediary to sell, distribute or deliver such commodity to the consumer in similar quantities; or

(iii) packages containing ten or more than ten retail packages provided that the retail packages are labeled as required under the rules.

21. Therefore even a commodity (that can even be containing a quantity of more than 25 kilogram or 25 litre) sold to an intermediary in bulk to enable such intermediary to sell, distribute or deliver such commodity to the consumer in similar quantities is considered as a “wholesale package” requiring a declaration under the Legal Metrology Act, 2009 read with the Rules.

22. The plain reading of the aforesaid provisions, therefore, entails that even the packages that have been exempted under Rule 3 can get covered under Rule 24 and hence shall still qualify as ‘pre-packaged and labelled’ under clause (ii) of the GST notification supra and thus shall not be eligible for exemption w.e.f. 18.07.2022.

23. We, therefore, suggest that CBIC must issue a clarification on the aforesaid aspect (interplay between Rule 3 and Rule 24) since in absence of the same it shall be naïve to continue claiming exemption on the specified ‘pre-packaged’ commodity if the same otherwise requires a declaration under the Legal Metrology Act, 2009 read with the Rules.

Exhibit A

HSN

Description Rate
0202, 0203, 0204, 0205, 0206, 0207, 0208, 0209, 0210 Meat and edible meat offal 5%
0303, 0304, 0305, 0306, 0307, 0308, 0309 Fish and crustaceans, molluscs  and other aquatic invertebrates 5%
0403 Curd; Lassi; Butter milk 5%
0406 Chena or paneer 5%
0409 Natural honey 5%
0504 Guts, Bladders And Stomachs Of Animals (Other Than Fish), Whole And Pieces Thereof, Fresh, Chilled, Frozen, Salted, In Brine, Dried Or Smoked 5%
0713 Dried leguminous vegetables,  shelled, whether or not skinned or split 5%
0714 Manioc, arrowroot, salep, Jerusalem artichokes, sweet potatoes and similar roots and tubers with high starch  or inulin content, frozen, whether or not sliced or in the form of pellets 5%
08 Dried makhana, whether or not shelled or peeled 5%
1001 Wheat and meslin 5%
1002 Rye 5%
1003 Barley 5%
1004 Oats 5%
1005 Maize Corn 5%
1006 Rice 5%
1007 Grain sorghum 5%
1008 Buckwheat, millet and canary seed; [other cereals such as Jawar, Bajra, Ragi] 5%
1101 Wheat or meslin flour 5%
1102 Cereal flours other than of wheat or meslin, [maize (corn) flour, Rye flour, etc.] 5%
1103 Cereal groats, meal and pellets 5%
1105 Flour, powder, flakes, granules or pellets of potatoes 5%
1106 Flour, of the dried leguminous vegetables of heading 0713 (pulses) [other than guar meal 1106 10 10 and guar gum refined split 1106 10 90], of sago or of roots or tubers of heading 0714 or of the products of Chapter 8  i.e. of tamarind, of singoda, mango flour,etc. 5%
1701 or 1702 Jaggery of all types including Cane Jaggery (gur), Palmyra Jaggery; Khandsari Sugar 5%
1904 Puffed rice, commonly known as Muri, flattened or beaten rice, commonly known as Chira, parched rice, commonly known as khoi, parched paddy or rice coated with sugar or gur, commonly known as Murki 5%
2009 89 90 Tender coconut water 12%
3101 Animal or vegetable fertilisers, whether or not Mixed together or chemically treated; fertilisers produced by the mixing or chemical treatment of animal or vegetable products and organic manure 5%
53 Coir pith compost 5%

 

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