GST was exempted on specified food items, grains etc. when not branded, or right on the brand has been foregone. During the 47^th GST Council Meeting, it was recommended to revise the scope of exemption to exclude from it pre-packaged and pre-labelled retail pack in terms of Legal Metrology Act, including pre-packed, pre-labelled curd, lassi and butter milk.

Based on the recommendations of the GST Council, Notification Nos. 06/2022 (amending Rate Notification) and 07/2022 (amending the exemption Notification) both dated July 13, 2022 have been issued wherein the expression ‘pre-packaged and labelled’ has been defined, i.e., means a ‘pre-packaged commodity’ as defined in clause (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.’

After going through the amendments carried out by way of the Notifications (supra), it is amply clear that there will be no difference between branded / non-branded specified food items, grains etc. for the purpose of leviability of GST.  Therefore, w.e.f. July 18, 2022, the only requirement, which needs to be considered for the purpose of leviability of GST is, “pre-packaged and labelled”.

The term ‘pre-packaged commodity’ has been defined under Section 2(l) of the Legal Metrology Act, 2009 as under:

‘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 predetermined quantity”

Rule 3 (Chapter II – Provisions applicable to packages intended for retail sale) of Legal Metrology (Packaged Commodities) Rules, 2011 inter-alia provides that the provisions of this chapter shall not apply to packages of commodities containing quantity of more than 25 kgs or 25 litres and packaged commodities meant for industrial consumers or institutional consumers. Further, Rule 6 of the said Rules provides a complete code on information to be declared on every package intended for retail sale.

On a combined reading of the provisions of Rule 3 read with Rule 6, it can be transpired that packages upto 25 kgs / litres require mandatory declarations. In other words, packages more than 25 kgs will not be governed by the provisions of the Legal Metrology Act. 

Conclusion

(i) GST will be leviable on labelled packages (whether branded or unbranded), if packaging quantity is upto 25 kgs;

(ii) GST will be leviable on retail packages (like 1 kg, 2kg, 5 kg etc. upto 25Kgs) packed in a wholesale package (packages containing ten or more than ten retail packages) though wholesale package quantity is more than 25 kgs;

(iii) No GST will be leviable where the single packaging quantity is more than 25 Kgs despite the same are branded or labelled;

(iv) No GST will be leviable on such packaged commodities which are meant for industrial consumers or institutional consumers though packaging quantity is less than 25 Kgs;

(v) No GST will be leviable where commodity is packed in front of the customer as it would be outside the scope of the definition of pre-packaged commodity.

It is relevant to mention here that any kind of labelling on the plain packages where commodities are pre-packed (quantity upto 25 Kgs), be it name of the packer / manufacturer, MRP etc., would make the commodities (specified food items, grains etc.) taxable under the GST. 

It would be interesting to see as to how the Department ensures that GST is paid by the retailers, who undertakes packaging activity (which could be for the convenience of purchaser) at their level after procuring the commodities in large volume (packages of more than 25kgs on which GST is not charged by the supplier of goods) and do not put any label / declaration on such pre-packaged commodities (Rule 6 mandates that every package shall bear thereon or label securely affixed thereto shall bear the requisite declarations), which in our view is a non-compliance of the provisions of Legal Metrology ).

The Department will surely contend that such packages are exigible to GST as the same will be construed as “pre-packaged commodity” as per the definition provided under the Legal Metrology Act and no exemption has been provided under the Legal Metrology in this regard.

The views expressed in this post are the personal views and for informational purposes only. The information which is summarized herein does not constitute a professional / legal advice. A detailed and thorough examination of the facts and circumstances of a particular situation are always needed for any legal opinion / advice.