Government Clarifies On 5% GST Applicability On Pre-Packaged Items

A pre-packaged and labelled commodity that attracts the GST has two attributes that differentiates it, CBIC says.

<div class="paragraphs"><p>A weighing scale. (Photo:&nbsp;Piret Ilver/Unsplash)</p></div>
A weighing scale. (Photo: Piret Ilver/Unsplash)

The government has clarified that goods and services tax on pre-packaged and labelled food items would be levied on packs that weigh up to 25 kilograms or 25 litres.

For instance, a single packet of atta (wheat flour) meant for retail sale in a shop that weighs 25 kg or less will attract a 5% GST, while a 30-kg pack will be exempted, the Central Board of Indirect Taxes and Customs, under the Ministry of Finance, said in a FAQ document on July 17.

The 47th GST Council, in its meeting held last month, had said pre-packaged dairy products such as lassi, curd, cheese, and buttermilk, and items like wheat flour, other grains, honey, papad, cereals, meat and fish (excluding frozen items), and jaggery that were earlier exempt from the GST will now be at the lowest slab of 5%. Earlier, only branded retail items attracted the GST. The new rates are effective July 18.

According to the FAQ, a pre-packaged and labelled commodity that attracts the GST has two attributes that differentiates it—

  • It’s packaged and labelled with a pre-determined weight.

  • It’s declared under provisions of Legal Metrology Act, 2009 (1 of 2010) and the rules under it. This deals with standards of weights and measures that regulates trade and commerce.

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“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,” it said.

Also, the document clarified that if multiple packages (say 10) of weight less than 25 kg (say, 5-10 kg) are sold together but intended for individual retail sale to the consumer, then such a supply would be liable to attract the 5% GST.

Besides, the GST levy would be imposed on any stage of the supply whenever goods change hands, that’s manufacturer supplying to distributor, or distributor/dealer supplying to retailer, or retailer supplying to individual consumer, the CBIC said. And such a manufacturer, wholesaler or retailer can also claim input tax credit in accordance to the GST charged by their supplier.

“If the supplier is availing threshold exemption or composition scheme, then they would be entitled to exemption or composition rate, as the case may be,” the document said.

When’s The 5% GST Exempt

The 5% GST would not be applicable if:

  • A retailer sells supplies in loose quantity. Such a supply is not considered packaged for the purpose of GST levy.

  • When the supply of packaged good is for consumption by an industrial consumer or institutional consumer.