The Ministry of Finance (Department of Revenue) issued Notification 6/2022 dated 13.07.2022, which among other things, imposed 5% GST on items like pulses, cereals like rice, wheat, and flour (aata), etc., which are not bearing a registered brand name with effect from 18.07.2022. Earlier, these items were liable for GST @ 5% only if they were bearing a registered brand name. This Notification stipulates that with effect from 18.07.2022, these items would attract GST when “prepackaged and labelled” in accordance with Section 2(l) of the Legal Metrology Act and Rules framed thereunder.
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 predetermined quantity.
Thus, supply of such specified commodity having the following two attributes would attract GST:
It is pre-packaged; and
It is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 (1 of 2010) and the rules made thereunder.
The Legal Metrology (Packaged Commodities) Rules, 2011 deals with inter alia the legal requirements of how commodities are to be packaged for sale in India, and the details that are required to be declared on such packages.
As per Rule 5 of the Legal Metrology (Packaged Commodities) Rules, 2011, commodities specified in the Second Schedule were to be packed and sold in recommended standard packages of specified weights or measures specified therein.
No. 6 of the Second Schedule pertained to Cereals and Pulses, and stipulated that Cereals and Pulses shall be sold in packets of 100 G, 200G, 500G, 1KG, 2KG or 5KG and thereafter multiples of 5KG.
Rule 6 stipulates the declarations that are mandatorily to be made on every package.
It is pertinent to mention that Rule 3(a) states that packages of commodities containing quantity more than 25 kg or 25 liters are not required to make the declarations under Rule 6.
Recently, there have been two amendments passed by the Ministry of Consumer Affairs, Food and Public Distribution to the Legal Metrology (Packaged Commodities) Rules, one dated 02.11.2021, which was supposed to come into effect from 01.04.2022, and the other dated 28.03.2022, which is supposed to come into effect from 01.10.2022.
The Amendment Rules of 2022 mainly extended the date of enforcement of the Amendment Rules of 2021 from April to October 2022.
The important amendments brought by the two Amendment Rules are summarized below:
Amendment Rules, 2021:
a. Rule 5 was to be omitted with effect from 1st April 2022.b. Rule 6 was amended to include a new sub-Rule (11). Rule 6 deals with the mandatory declarations to be made on packages, and the new sub-Rule 11 stipulated how unit sale prices should be indicated.
c. Rule 13(5)(ii) was also amended, whereby now for items sold by number, the number or word (such as pair, piece, unit, set) representing the quantity in the package should now be mentioned.
Amendment Rules, 2022:
a. The omission of Rule 5 was extended to 1st October 2022. (This means the provisions of Rule 5 are still effective up to 30-09-2022.) The Second Schedule was also omitted.
b. The Amendment Rules of 2022 also amended sub-Rule (11) to Rule 6, which now stipulates that the Unit Sale Price in Rupees, rounded off to the nearest two decimal places, shall be declared for pre-packaged commodities in the following manner:
“Rs. __ per gram” where net quantity is less than one kilogram
“Rs. __ per kilogram” where net quantity is equal to or more than one kilogram;
“Rs. __ per centimeter” where net length is less than one meter
“Rs. __ per metre” where net length is equal to or more than one metre
“Rs. __ per milliliter” where net volume is less than one litre
“Rs. __ per litre” where net volume is equal to or more than one litre
Per number or unit if any item is sold by number or unit
Provided that the State Excise Laws will apply within the state of manufacture for alcoholic beverages and spirituous liquor;
Provided further that if the retail sale price and unit sale price are equal, then the declaration of unit sale price is not required to be made.
c. The Amendment Rules, 2022 at Sl. No. 6 also provide that if a manufacturer or packer or importer makes declarations from 01.04.2022 in accordance with the previous amendment (Amendment Rules, 2021), then no prosecution would be initiated against him. The relevant extract reads as follows:
“No prosecution shall be initiated against the manufacturer or packer or importer of prepackaged commodities for making declaration with effect from 1st April 2022 in accordance with Legal Metrology (Packaged Commodities) Rules, 2011, as amended by the Legal Metrology (Packaged Commodities) Amendment Rules, 2021 published vide number G.S.R. 779(E), dated the 2nd November 2021.”
Therefore, to summarize, the levy of GST @ 5% is applicable to pre-packaged and labeled commodities like rice, wheat, and flour (aata), etc., whether branded or not, for packages weighing up to 25 kg.
As per the provisions of the Notification 6/2022 Central Tax (Rate), the levy of 5% GST would not be applicable to packages of rice, wheat, etc. weighing more than 25kg. Furthermore, the applicability of the Legal Metrology (Packaged Commodities) Amendment Rules, 2021 would mean that manufacturers are no longer required to make packets in multiples of 5kg from 1st October 2022. However, if such packages weighing in non-multiples of 5kg have been made from 1st April 2022 onwards, then no prosecution will be initiated against them in accordance with the Legal Metrology (Packaged Commodities) Amendment Rules 2022.