CBIC Releases FAQs On GST Applicability On "Pre-Packaged And Labelled Goods"

There were several changes relating to GST rates, in pursuance of recommendations made by the GST Council in its 47th meeting, which come into effect from the 18th of July, 2022. One such change is moving from the 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 is available to the imposition of GST on goods when "pre-packaged and labelled".

The Board has received certain representations seeking clarification on the scope of the change, particularly in respect of food items like pulses, flour, cereals, etc. It has been notified vide notification No. 6/2022-Central Tax (Rate), dated the 13th of July, 2022, and the corresponding notifications for SGST and IGST.

The clarification sought was in respect of changes that were made with respect to packaged and labelled commodities with effect from July 18th, 2022.

The CBIC clarified that prior to July 18, 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 a brand name in respect of which an actionable claim or enforceable right in a court of law was available.

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

For 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 a unit container. With effect from 18.7.2022, the items would attract 5% GST when "pre-packaged and labelled".

Yet another clarification sought was in respect of the scope of 'pre-packaged and labelled' for the purpose of the GST levy on food items like pulses, cereals, and flour.

The Board has clarified that the expression 'pre-packaged and labelled' means a 'pre-packaged commodity' as defined in clause (l) of section 2 of the Legal Metrology Act, 2009. The package in which the commodity is pre-packed or a label securely affixed is required to bear the declarations under the provisions of the Legal Metrology Act.

The supply of specified commodities having two attributes would attract GST. Firstly, it is pre-packaged. Secondly, it is required to bear the declarations under the provisions of the Legal Metrology Act, 2009.

However, if specified commodities are supplied in a package that does not require declaration or compliance under the Legal Metrology Act, 2009, it would not be treated as pre-packaged and labelled for the purposes of the GST levy.

The CBIC has clarified that a single package of cereals, pulses, flour, etc. containing a quantity of more than 25 Kg/25 litre would not fall into the category of a pre-packaged and labelled commodity for the purposes of GST and would therefore not attract GST.

The clarification was sought on whether GST would apply to a package that contains multiple retail packages.

The CBIC clarified that if several packages intended for retail sale to the ultimate consumer, say 10 packages of 10 kg each, are sold in a larger pack, then GST would apply to such supply. The packages may be sold by a manufacturer through a distributor. The individual packs of 10 kg each are meant for eventual sale to retail consumers.

"However, a package of say, rice containing 50 kg (in one individual package) would not be considered a pre-packaged and labelled commodity for the purposes of the GST levy, even if rule 24 of the Legal Metrology (Packaged Commodities) Rules, 2011, mandates certain declarations to be made on a wholesale package," the Board said.

The clarification was sought on the issue of whether GST would apply on specified goods sold by a manufacturer/producer to wholesale dealers who subsequently sell them to a retailer.

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

Yet another issue raised by illustrating that "X" is a rice miller who sells packages containing 20 kg of rice but does not make the required declaration under the legal metrology Act and the Rules (although the Act requires a declaration). Would it still be considered pre-packaged and labelled and therefore be liable to GST?

The CBIC ruled that the packages would be considered as pre-packaged and labelled commodities for the purposes of GST as it requires making a declaration under the Legal Metrology (Packaged Commodities) Rules, 2011 (rule 6 thereof). Hence, miller 'X' would be required to pay GST on the supply of the package (s).

F. No. 190354/172/2022-TRU

Dated: 17.07.2022

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