Analysis of Proposed Amendment to Tax Unbranded Food and Food Products.

Analysis of Proposed Amendment to Bring Unbranded Food and Food Products under Tax

Analysis of Proposed Amendment to Bring Unbranded Food and Food Products under Tax

Text of the Press Release by GST Council

“Withdrawal of exemptions [Approval of recommendations made by GoM on rate rationalization]

C1. Hitherto, GST was exempted on specified food items, grains etc when not branded, or right on the brand has been foregone. It has been recommended to revise the scope of exemption to exclude from it prepackaged and pre-labelled retail pack in terms of Legal Metrology Act, including pre-packed, pre-labelled curd, lassi and butter milk”

Notification No.2/2017-Central Tax (Rate) of the CGST Act covers HSN of all the goods that fall under Exempted Category. The notification consists of Exhaustive list of items including but not limited to Food Items and Food Products.

Any Changes if to be made in terms of inclusion or exclusion of food and food products is done in reference to the above notification. This notification includes 149 items like food & food Products, animal feeds, Silk, Firewood. The GST Council through amendments in the Act intends to reduce the items that fall under the said exemption notification.

In its effort to do so it seeks to bring items falling under HSN code starting from HSN No. 10 and 11 (total 14 items) which were earlier exempt due to there non branded packaging into the purview of GST. The scope of removal of exemption would be limited to these 14 items only can be reasonably estimated from the fact that only these 14 items are covered under exempted category by virtue of being categorized as Unbranded and the Council seeks to bring items into tax by them virtue of being packaged and labelled and not just being branded.

The GST Council seeks to replace “other than those put up in unit container and bearing a registered brand name” with “prepackaged and pre-labelled retail pack in terms of Legal Metrology Act”. Here we also need to understand the definition of the “Prepacked” and “Pre-Labelled” is as below:

“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 pre-determined quantity;

And

“label” means any written, marked, stamped, printed or graphic matter affixed to, or appearing upon any pre-packaged commodity;

Further, the scope of amendment would be limited to these items is substantiated from the fact the GST Council intends to Tax Food and Food Products only, where food and food products are defined as:

The reference of food and food products is made in Circular No. 164 /20 /2021-GST which mentions foods and food products include items as mentioned in Sl. No. 26 [Item 1(i)f] of notification No. 11/2017-Central Tax (R) dated 28-6-2017.

The said notification further defines food and food products as items mentioned between Chapter 1 to 22 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975). Which effectively mean that items starting from HSN code 01 upto HSN code starting from 22.

Since under the Custom tariff act residues and waste products from food industries and Animal Fodder are part of Chapter 23 of the Custom Act and correspondingly, they start from HSN code 23 onwards they do not form part of the category food and food products.

Therefore, as per AAGC analysis items bearing HSN code 2302, 2304, 2305, 2306, 2308, 2309 including items like Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake would continue to be exempted even after withdrawal of exemption on unbranded food products.

The 14 Items that should get taxed as result of said amendments are:

This Article is based upon author’s understanding of the proposed amendment in the 47th GST council Meeting. Please feel free to give your feedback or ask any related question.

Analysis of Proposed Amendment to Tax Unbranded Food and Food Products

Analysis of Proposed Amendment to Bring Unbranded Food and Food Products under Tax

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