Shift from "Registered brand" to "Pre-packaged and Labelled" on Specified goods

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Background:

Specified goods on which "registered brand or brand in respect of which an actionable claim or enforceable right in a court of law is available" was one of the most spoken challenges at the inception of GST regime as it was attracting 5% GST especially in case of  pulses, cereals like rice, wheat, and flour (aata), etc.

Later on this scenario was further evolved vide Notification No.28/2017 Central Tax Rate dt.22.09.2017 wherein if you file an affidavit for foregoing an actionable claim or enforceable right on a brand name, it will not be taxed under GST. This created a mad rush among those manufacturers and traders to opt for it, and to stay away from the tax net. 

 It is learnt that the Group of Ministers (GoM) reviewing the GST rates in this context has decided to remove exemption for packaged food items, if sold under unregistered brands. The GoM’s decision follows Tripura High Court’s judgement wherein the court upheld the tax demand on the company for selling packaged rice under the marking as Aahar normal, Aahar Gold, Aahar premium. The company had claimed that these were not the brand names, but an “internal arrangement” to indicate the quality variety. In the eyes of end consumers, these markings are nothing but branding.


Pre-Packaged and Labelled:

Vide Notification 06/2022 Central Tax Rate  The expression ‘pre-packaged and labelled’ 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

Its apparent to build the operational definition of what is  "Pre-packaged commodity" from the Legal Metrology Act. Clause (l) of section 2 of the Legal Metrology Act reads as below: 

(l) “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."

Thus, supply of such specified commodity having the following two attributes would attract GST:

(i) It is pre-packaged; and

(ii) It is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 (1 of 2010) and the rules made thereunder

As this Legal Metrology Act meant for end consumers, the following supplies needn't come under this purview:

  • Packages containing more than 25 Kg/ Litre
    • Exception being if a wholesale pack as per rule 2(r)  contains a number of retail packages or commodity sold in bulk to intermediary for further supplies needs declaration under this Act.
  • Cement, Fertilizers and agricultural farm produce sold in bags above 50 kg
  • Packages meant for Industrial and Institutional customers

Snapshot to understand taxability under GST:







From a consumers point of view...it fuels inflation amidst of global inflation and recession fears...

- LDR
Lets redefine your GST expertise

The opinions, suggestions or thoughts expressed are that of the author of this article, please exercise adequate care in applying to your own scenario with appropriate technical advise as deem necessary.

Comments

  1. Legal & Compliance ServicesJanuary 24, 2025 at 1:27 PM

    Legal Metrology Registration ensures compliance with laws related to weights, measurements, and packaged goods. It is essential for manufacturers, importers, and traders to avoid penalties and build customer trust. This registration promotes accuracy, transparency, and fair trade practices. Stay legally compliant and enhance your business reputation with seamless registration today.

    ReplyDelete

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