GST applicability on pre-packaged and labelled products

Specified food items were exempted vide the exemption notification no. 2/2017- Central Tax (Rate) dated 28^th June 2017. Notably, GST exemption was available on specified pre-packed food products like rice; honey; wheat etc. either sold under an unregistered brand name or brand name under which actionable claim/ enforceable right is voluntarily forgone. However, the 47^th GST council meeting came up with a recommendation to reconsider the scope of exemption on such specified food items/ grains etc. It was recommended to exclude the specified pre-packaged and the pre-labelled retail packs from the GST exemption. Accordingly, Government came up with notification no. 6/2022- Central Tax (Rate) dated 13^th July 2022 carrying out required changes in the rate notification no. 1/2017- Central Tax (Rate) dated 28^th June 2017. And also issued a notification no. 7/2022- Central Tax (Rate) dated 13^th July 2022 carrying out required exemption changes in notification no. 2/2017- Central Tax (Rate) dated 28^th June 2017. Further, some relevant FAQs are also answered vide F. No. 190354/172/2022-TRU dated 17^th July 2022. The present article tries to clear up the position of pre-packaged and labelled products both pre and post 18^th July 2022.

GST position on pre-packaged and labelled products prior to 18^th July 2022 –

Till 17^th July 2022, exemption, vide notification no. 2/2017- Central Tax (Rate) dated 28^th June 2017, was made available to specified food items. Such exemption was also available on specified pre-packaged commodity/ products when sold under an unregistered brand name or registered brand name under which actionable claim/ enforceable right was forgone voluntarily.

GST position on pre-packaged and labelled products with effect from 18^th July 2022 –

Both the amending notification i.e., notification no. 6/2022- Central Tax (Rate) dated 13^th July 2022 and notification no. 7/2022- Central Tax (Rate) dated 13^th July 2022 is made effective from 18^th July 2022. Accordingly, from 18^th July 2022, the position of pre-packaged and labelled products post amendment, is defined hereunder –

1. Specified goods sold via the pre-packaged and labelled form are taxable under GST [notification no. 6/2022- Central Tax (Rate) dated 13^th July 2022]; and
2. Specified goods which do not qualify as pre-packaged and labelled form are exempted under GST [notification no. 7/2022- Central Tax (Rate) dated 13^th July 2022].

In order to understand the above position, it is pertinent to go through the definition of ‘pre-packaged and labelled’. Which is explained hereunder.

Definition of ‘pre-packaged and labelled’ –

The amending notifications no. 6/2022- Central Tax (Rate) dated 13^th July 2022 and 7/2022- Central Tax (Rate) dated 13^th July 2022 define the term ‘pre-packaged and labelled’ as ‘pre-packaged commodity’ defined in section 2(l) of the Legal Metrology Act, 2009 where, the package (in which the commodity is pre-packed) or the label (securely affixed thereto) is required to cover the declaration under the provisions of Legal Metrology Act, 2009. In nut-shell, the pre-packaged and labelled product will be taxable from 18^th July 2022 if it satisfies the following two conditions – Condition 1 – It is a ‘pre-packaged’ product/ commodity; and Condition 2 – Such a ‘pre-packaged’ product/ commodity is required to cover the declaration under the provisions of the Legal Metrology Act, 2009. Notably, according to section 2(l) of the Legal Metrology Act, 2009, ‘pre-packaged commodity’ means a commodity is placed in a package (whether sealed or not) so that such product contained therein has a pre-determined quantity.

Applicability and non-applicability of Legal Metrology Act to the pre-packaged commodity vis-à-vis GST –

Applicability and exemption available to pre-packaged commodity is summed up hereunder –

1. Specified ‘Pre-packaged and labelled’ commodity that is required to bear the declaration as applicable under Legal Metrology Act is taxable under GST with effect from 18^th July 2022.
2. Legal Metrology Act and rules made thereunder not applicable to specified ‘pre-packaged and labelled’ commodity will continue to get exemption under GST.

It is important to note that the following categories of the packaged commodity which are intended for retail sale are excluded from the applicability of the Legal Metrology Act and accordingly will be exempt from GST as well –

• Package of the commodity having a quantity of more than 25kg/ 25litres;
• Package commodity meant for institutional consumers/ industrial consumers;
• Fertilizers and cement sold via bags up to 50kg.

Coming to the applicability of the Legal Metrology Act in the case of wholesale packages. According to the provisions, the Legal Metrology Act and rules made thereunder is not applicable to the wholesale packages where the similar declaration is required to be provided under any other law. Hence, all such wholesale packages which are exempted from the applicability of Legal Metrology Act are eligible for the exemption under GST.

Summary of clarification provided with respect to the applicability of GST on ‘pre-packaged and labelled’ products –

Vide F. No. 190354/172/2022-TRU dated 17^th July 2022 some of the relevant issues are answered. The same is explained hereunder –

• Items like wheat, rice, pulses, flour etc. will attract GST with effect from 18^th July 2022 when such items are ‘pre-packaged and labelled’ where the package contained a quantity up to 25KG/ 25Litres.
• A single package of items like wheat, rice, pulses, flour, etc. having a quantity of more than 25KG/ 25Litres will not fall under the category of ‘pre-packaged and labelled’ commodity and accordingly will not attract GST.
• Items like lassi, curd, puffed rice, etc. will attract GST @5% with effect from 18^th July 2022 when such items are ‘pre-packaged and labelled’.
• Specified commodities supplied in a package, but, doesn’t require a declaration under the Legal Metrology Act and rules made thereunder. Then, such commodities will not be treated as ‘pre-packaged and labelled’ for the purpose of taxability under GST.