Supply of ‘Unbranded & Unlabelled Broken Rice’ Exempt from GST, 5% GST Applies If ‘Pre-Packed & Labelled’: AAR [Read Order]

The West Bengal Authority for Advance Ruling (AAR) has clarified that the supply of broken rice when it is ‘unbranded and unlabelled’, will be exempt from the Goods and Services Tax (GST). However, a 5% GST rate will apply if the broken rice is ‘pre-packaged and labelled’ in accordance with the Legal Metrology Act, 2009.

The West Bengal AAR made this decision in response to an application filed by Mr. Tamal Kundu, a rice manufacturer based in Kolkata, West Bengal.

The applicant sought an advance ruling to determine the GST liability on the sale of ‘broken rice’ generated from the rice milling process. Specifically, the question raised was whether the sale of unbranded and non-packaged broken rice should be taxed at 5%.

The Authority’s findings were based on a thorough examination of the relevant provisions of the Central Goods and Services Tax (CGST) Act, 2017 and the West Bengal Goods and Services Tax (WBGST) Act, 2017. The authority also considered the changes in GST regulations effective from July 18, 2022.

The Authority clarified that the classification of ‘broken rice’ falls under Chapter Heading 1006 of the Customs Tariff and its tax rate is the same as that of regular rice. According to the Notification No. 06/2022-Central Tax (Rate) dated July 13, 2022, “Rice, pre-packaged and labelled” is subject to a 5% GST rate, while “Rice, other than pre-packaged and labelled” is exempt from GST. This distinction is in line with the amendments made to GST Rules to bring ‘pre-packaged and labelled’ goods under the purview of GST.

In the context of food items such as ‘broken rice’, the supply of specified pre-packaged food articles is considered a “pre-packaged commodity” under the Legal Metrology Act, 2009, and the relevant Rules if the package contains up to 25 kilograms. This clarification ensures that products packaged and labeled as per legal requirements are subject to the 5% GST rate.

However, if broken rice is supplied without pre-packaging and labeling that requires adherence to the Legal Metrology Act, it falls under the category of “Rice, other than pre-packaged and labelled”, and hence, is exempt from GST.

This ruling distinguishes between broken rice that is packaged and labeled, and that which is not. As a result, “unbranded and unlabelled broken rice” will not be subjected to GST, benefiting both the producers and consumers.

Additionally, it highlights the importance of compliance with the Legal Metrology Act when it comes to labeling and packaging food products for tax purposes.

In conclusion, the two-member authority of the WBAAR comprising Dr. Tanisha Dutta (CGST Member) and Joyjit Banik (SGST Member) exempts “unbranded and unlabelled broken rice” from GST and imposes a 5% GST rate on “pre-packaged and labeled varieties” providing clarity in the taxation of this essential food product.

To Read the full text of the Order CLICK HERE

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