5% GST on pre-packaged items of up to 25 Kg: CBIC issues FAQs on GST applicability on pre-packaged goods
“It is clarified that a single package of these items [cereals, pulses, flour etc.] containing a quantity of more than 25 Kg/25 litre would not fall in the category of pre-packaged and labelled commodity for the purposes of GST and would therefore not attract GST,” the CBIC said.
GST on package containing multiple retail packages
It also answered whether GST would apply to a package containing multiple retail packages. For example, a package containing 10 retail packs of flour of 10 Kg each?
If several packages intended for retail sale to the ultimate consumer are sold in a larger pack, then GST would apply to such supply. Such a package may be sold by a manufacturer through a distributor. “These individual packs of 10 Kg each are meant for eventual sale to retail consumer,” the CBIC said.
The CBIC also clarified that packaged commodities supplied for consumption by industrial consumers or institutional consumers are excluded from the purview of the Legal Metrology Act. Therefore, no GST will be attracted to this.
The CBIC came out with the FAQs list after several businesses said that its notification issued left much ambiguity and may be subject to multiple interpretations. Experts said that the notification mentioned retail sales only.
Imposition of GST on pre-packaged items is likely to have adverse implications on the small traders and retailers who hitherto were outside the GST net and had neither obtained any GST registration nor undertaken any compliances, Sanjay Chhabria, Director Nexdigm, told Economic Times.
He added that with such pre-packaged and pre-labelled food items getting costlier for the end consumers, the levy could lure them to more established brands, or prefer items which are loosely sold given that they continue to be exempt from GST.
