5% GST imposed on pre-packaged food products

18 Jul 2022 , 09:02 AM

The Central Board of Indirect Taxes and Customs (CBIC) made it clear on Sunday that all pre-packaged cereals, food products weighing up to 25 kg will be subject to a GST of 5%. According to the CBIC, pre-packaged commodities weighing more than 25 kg in a single packet would not be subject to GST.

Additionally, the clarification said that GST would apply to such a supply if many packages offered in a bigger pack are intended for retail sale to the final customer, such as ten packages of 10 kg each. A manufacturer may sell such a bundle via a distributor.

For example, even though rule 24 of the Legal Metrology (Packaged Commodities) Rules, 2011, requires certain declarations to be made on such wholesale commodities, a package of rice comprising 50 kg would not be regarded as a pre-packaged and labeled commodity for the purposes of the GST duty.

The CBIC further made it clear that the Legal Metrology Act does not apply to packaged goods sold to industrial or institutional users for consumption. As a result, no GST will be charged on this.

If a manufacturer supplies to a distributor, a dealer, or a store, GST will be applied to that transaction, but the manufacturer, wholesaler, or retailer will be entitled to an input tax credit on the GST that his supplier charged in line with the GST’s rules for input tax credits.

The clarification was made in response to complaints from several firms that the CBIC’s announcement was unclear and open to many interpretations.

Following the 47th GST council meeting held in Chandigarh, the Finance Ministry has announced GST rates for a number of items supplied as pre-packaged and pre-labeled alongside others.