FAQs – GST on ‘Pre-packaged and labelled’ Goods : Effective from 18th July, 2022

The changes relating to GST rate, in pursuance of recommendations made by the GST Council in its 47th meeting, are coming into effect from the 18th of July, 2022. One such change is moving from imposition of GST on specified goods when bearing a registered brand or brand in respect of which an actionable claim or enforceable right in a court of law is available to imposition of GST on such goods when “pre-packaged and labelled”.

Prior to 18th of July, 2022: GST applied on specified goods when they were put up in a unit container and were bearing a registered brand name or were bearing brand name in respect of which an actionable claim or enforceable right in a court of law is available.

With effect from the 18th July 2022: This provision undergoes a change and GST has been made applicable on supply of such “pre-packaged and labelled” commodities attracting the provisions of Legal Metrology Act.

Example, items like pulses, cereals like rice, wheat, and flour (aata), etc., earlier attracted GST at the rate of 5% when branded and packed in unit container (as mentioned above). With effect from 18.7.2022, these items would attract GST when “pre-packaged and labelled”. Additionally, certain other items such as Curd, Lassi, puffed rice etc. when “pre-packaged and labelled” would attract GST at the rate of 5% with effect from the 18th July, 2022.

So, as per the amendment now Brand/Non-Brand is not a criterion for the GST applicability. Hence if the branded commodity is eligible in the exemption of amended provisions GST would not be applicable.

Certain issues are clarified in the form of Frequently Asked Questions (FAQs). Pointwise summary is hereunder:

Two main attributes to attract GST

Supply of such specified commodity having the following two attributes would attract GST:

• It is pre-packaged; and
• It is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 (1 of 2010) and the rules made thereunder.

However, if such specified commodities are supplied in a package that do not require declaration(s)/compliance(s) under the Legal Metrology Act, 2009 (1 of 2010), and the rules made thereunder, the same would not be treated as pre-packaged and labelled for the purposes of GST levy.

GST shall not apply to-

(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.]

Different scenarios and taxability for the same is summarized in the below table:

GST would apply whenever a supply of such goods is made by any person, i.e., manufacturer supplying to distributor, or distributor/dealer supplying to retailer, or retailer supplying to individual consumer. Further, the manufacturer/wholesaler/retailer would be entitled to input tax credit on GST charged by his supplier in accordance with the Input Tax Credit provisions in GST. A supplier availing threshold exemption or composition scheme would be entitled to exemption or composition rate, as the case may be, in usual manner.

Nothing contained in these rules shall apply to any package containing a commodity if (Rule 26)—

• The net weight or measure of the commodity is ten gram or ten milliliter or less, if sold by weight or measure: [Provided that the provisions of this clause shall be applicable for tobacco and tobacco products.] 
• Any package containing fast food items packed by restaurant or hotel and the like; 
• 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 declared as drugs.
• Any thread which is sold in coil to handloom weavers

It is reiterated therefore that, if supplied in such manner as to attract exclusion, or such exemption, the item shall not be treated as pre-packaged commodities for the purposes of GST levy.

Liability of each supplier(Wholesaler/Retailer) is independent and they have to check criteria and decide the taxability as per the provision of the Act.

Relevant Definitions:

“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 purpose of “retail food package”, the definition of the same contained in the rules or regulations made under the Food Safety and Standards Act, 2006 (34 of 2006) shall apply]

“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 labelled as required under the rules.

“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’;]

“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;]

The amendment made by GST council is going to have wider effect in the industry.

Disclaimer:  This article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event, RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update, etc if any.

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