GST leviable on Export of Pre-Packaged and Labelled Rice upto 25 Kgs to Foreign Buyer: AAR [Read Order]

The Andhra Pradesh Authority for Advance Ruling ( AAR ) observed that GST is leviable on export of pre-packaged and labelled rice upto 25 kgs to foreign buyer.

M/s. Sarala Foods Private Limited, engaged in the manufacturing and supply of rice, sought an advance ruling on the GST applicability on the export of pre-packaged and labelled rice up to 25Kgs. The application was made under Section 97 of the CGST and APGST Acts and the company sought clarity on three distinct types of supply transactions to foreign buyers, exporters for re-export, and direct supply to the exporters’ factories.

The applicant stated that, foreign buyer provides the specification which has to be printed/labelled on the packages of rice, which arc intended for sale to it. Therefore, the applicant procures empty bags from the supplier of packing material and get them labelled according to the specifications of the foreign buyer. The rice is packed in empty bags having capacity up to 25kg and export them to foreign buyer.

The applicant submitted that, GST would apply on specified goods where the pre-packaged commodity is supplied in packages containing quantity of less than or equal to 25 kg. Pm-packaged and labelled commodities manufactured exclusively for export have not been excluded from the Legal Metrology Act, 2009 ( 1 of 2010 ), and the rules made there under.

The applicant further submitted that, GST would be applicable on the supply of prepackaged and labelled rice upto 25 kgs, irrespective of the fact that it is for domestic sale or for the purpose of exports.

The applicant referred to the amendment in Entry 51 of Schedule I of Notification No. 1/2017-Central Tax ( Rate ) dated 28.06.2017, which was further amended by Notification No. 06/2022-Central Tax ( Rate ) dated 13th July 2022, to argue that GST at 5% ( CGST 2.5% + SGST 2.5% ) is applicable on the supply of pre-packaged and labelled rice effective from 18th July 2022. This was based on the definition of ‘pre-packaged and labelled’ under the Legal Metrology Act, 2009, which requires such packages to bear declarations under the said Act and its rules.

A Two-Member Bench comprising K. Ravi Sankar and B. Lakshmi Narayana observed that “In the instant case, the ultimate buyer is not present and the commodity is being pre-packed for an unknown ultimate buyer. The buyer from the applicant is re-selling the same to another buyer be it export or indigenous. This advance ruling authority agrees with the observation regarding the applicability of GST on “prepackaged and labelled” irrespective of the fact that whether it is for domestic sale or exported outside the country.”

The Bench concluded that GST is leviable on export of pre-packaged and labelled rice upto 25 kgs to foreign buyer.

To Read the full text of the Order CLICK HERE

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