The West Bengal Authority of Advance Ruling (AAR) has recently ruled that, Goods and Services Tax (GST) is not payable by the applicant on supply of “broken rice‟ if the same is supplied “other than pre-packaged and labelled”.
The applicant, identified as Tamal Kundu, sought an advance ruling on the tax rate applicable to the supply of unbranded and non-packaged broken rice, in accordance with Section 97 of the GST Act and the related rules.
The applicant contended that broken rice is a byproduct of the rice milling process, specifically the polishing stage, amounting to around 2% of the total rice production. This broken rice is not pre-packaged or labelled and is primarily used for animal feed.
It was observed that, “the product “broken rice‟ is classifiable under Chapter Heading 1006. Therefore, the rate of tax on supply of “broken rice‟ would be the same as in the case of supply of rice.”
In terms of Notification No. 06/2022- Central Tax (Rate) dated 13.07.2022, “Rice, pre-packaged and labelled” attract tax @ 5% with effect from 18.07.2022. On the other hand, Notification No. 07/2022-Central Tax (Rate) dated 13.07.2022 exempts supply of “Rice, other than pre-packaged and labelled‟ with effect from 18.07.2022. In a Press Release posted on 18.07.2022 on the subject matter “FAQ on GST applicability on “pre-packaged and labelled goods‟, it has been clarified that “In the context of food items (such as pulses, cereals like rice, wheat, flour etc), the supply of specified prepackaged food articles would fall within the purview of the definition of ‘pre-packaged commodity’ under the Legal Metrology Act, 2009, and the rules made there under, if such pre-packaged and labelled packages contained a quantity up to 25 kilogram [or 25 litre] in terms of rule 3(a) of Legal Metrology (Packaged Commodities) Rules, 2011, subject to other exclusions provided in the Act and the Rules made there under.”
It was further noted that, in the said Press Release, it has further been clarified that “Supply of packaged commodity for consumption by industrial consumer or institutional consumer is excluded from the purview of the Legal Metrology Act by virtue of rule 3 (c) of Chapter-II of Legal Metrology (Packaged Commodities) Rules, 2011. Therefore, if supplied in such manner as to attract exclusion provided under the said rule 3(c), it will not be considered as pre-packaged and labelled for the purposes of GST levy.”
Upon thorough examination, the Authority determined that broken rice falls under Chapter Heading 1006 of the Customs Tariff, attracting the same tax rate as rice. According to the latest GST notifications, effective from July 18, 2022, rice supplied as “pre-packaged and labelled” is taxed at 5%, while rice supplied “other than pre-packaged and labelled” is exempt from GST.
Therefore, the Authority Bench of members Dr Tanisha Datta and Joyjit Banik ruled that goods and services tax is not applicable on the supply of broken rice if it is provided without being pre-packaged and labelled, in alignment with Notification No. 07/2022-Central Tax (Rate) dated 13.07.2022.
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