Food sold in the open not to attract GST, clarifies Finance Minister Nirmala Sitharaman
Food sold in the open not to attract GST, clarifies Finance Minister Nirmala Sitharaman
Finance Minister Nirmala Sitharaman clarified on July 19 that the GST Council has exempted from Goods and Services Tax (GST), all food items, including wheat, pulses, rice, maize, when sold in the open, and pre-packaged or Not pre-labelled.
“They will not attract any GST. Decision belongs to @GST_Council and there is no member,” she pointed out.
The Finance Minister, in 14 tweets, explained the decision-making process on changes in the GST rate for pre-packaged and pre-labeled, unbranded food items.
He said, “Recently, the GST Council in its 47th meeting had recommended to reconsider the approach of levying GST on specific food items like pulses, cereals, flour etc. A lot of misconceptions are spread about this.”
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She explained that this is not the first time that such food items are being taxed. In the pre-GST regime, the states were collecting significant revenue from food grains. Punjab alone collected over Rs 2,000 crore on food grains as purchase tax. Uttar Pradesh collected ₹700 crore, wrote Ms Sitharaman.
“Keeping this in mind, when GST was implemented, a GST rate of 5% was applied on branded cereals, pulses, flour. Later it was amended to levy tax on only those goods which were sold under the registered brand or brands on which the enforceable right was not relinquished by the supplier.
“However, soon a large-scale misuse of this provision was noticed by reputed manufacturers and brand owners and gradually the GST revenue from these items declined significantly.
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Dissatisfied over the issue, suppliers and industry associations, who were paying tax on branded goods, wrote to the government to levy GST uniformly on all packaged goods to prevent such misuse. The Finance Minister said that this large scale evasion in taxes was also noticed by the states.
The fitment committee – which included officials from Rajasthan, West Bengal, Tamil Nadu, Bihar, Uttar Pradesh, Karnataka, Maharashtra, Haryana and Gujarat – also examined the issue in several meetings and called for changes to prevent abuse. made your recommendations. “It is in this context that the GST Council took the decision in its 47th meeting,” Ms Sitharaman said.
With effect from July 18, 2022, only the modalities for levying GST on these items were changed, with no change in the coverage of GST except for two to three items.
It has been prescribed that GST will be applicable on these goods when supplied in “pre-packaged and labeled” goods attracting the provisions of the Legal Metrology Act.
For example, items like pulses, cereals like rice, wheat and flour, etc., earlier attracted 5% GST when branded and packaged in unit containers. From July 18, these items will attract GST if they are “pre-packaged and labeled”.
The Finance Minister further said that this was a unanimous decision of the GST Council. All the states were present in the GST Council when this issue was raised by the Group of Ministers on Rationalization of Rates in the 47th meeting held at Chandigarh on June 28, 2022.
“All states including non-BJP states (Punjab, Chhattisgarh, Rajasthan, Tamil Nadu, West Bengal, Andhra Pradesh, Telangana, Kerala) agree with this decision. This decision of the GST Council has once again been taken by consensus.
“In addition, the GoM that recommended these changes included members from West Bengal, Rajasthan, Kerala, Uttar Pradesh, Goa and Bihar and was led by the Chief Minister of Karnataka. It carefully considered the proposal keeping in mind the tax leakages.
“To conclude: This decision was very necessary to prevent tax leakage. It was considered at various levels including officials, Group of Ministers and finally recommended by the GST Council with full consent of all the members,” Ms Sitharaman wrote.