GST Hits Shrimp Exporters as AAR Says Small Packaged Units Are Taxable Retail Goods
The authority concluded that a commodity is considered "pre-packaged and labelled" if it is placed in a package of a pre-determined quantity without the purchaser being present and is required to bear declarations as per the Legal Metrology rules
AAR, Taxable Retail Goods, Shrimp Exporters
AAR, Taxable Retail Goods, Shrimp Exporters
In a significant ruling that impacts the seafood export industry, the Authority for Advance Ruling (AAR) in Andhra Pradesh has determined that processed frozen shrimp, when exported in small pre-packaged and labelled units, are subject to the Goods and Services Tax (GST). This decision clarifies that the taxability of such goods is based on the nature of the packaging and not on their final destination, meaning exports are not automatically exempt.
The case was brought before the AAR by Sprint Exports Pvt Ltd, a company engaged in the processing and export of shrimp. The company procures raw shrimp locally, processes it through steps like peeling, de-veining, and freezing, and then packages the final product for international buyers. Their packaging involves placing the shrimp in individual printed pouches or boxes, which are then consolidated into larger master cartons, with the total weight not exceeding 25 kilograms.
Sprint Exports sought clarity on whether their exports would attract GST following a 2022 tax notification. They argued that the amendment targeting "pre-packaged and labelled" goods was primarily intended to curb taxevasion in domestic retail sales and should not apply to exports where the ultimate consumer is outside India. The company referenced a 2023 ruling involving a similar case for rice exports to support its position.
However, the AAR meticulously analysed the definitions under the GST law and the Legal Metrology Act, 2009. The authority concluded that a commodity is considered "pre-packaged and labelled" if it is placed in a package of a pre-determined quantity without the purchaser being present and is required to bear declarations as per the Legal Metrology rules. It found that the individual inner pouches used by the exporter, weighing between 250 grams and 2 kilograms and bearing printed labels, perfectly fit this definition. The AAR emphasized that these inner packages are intended for retail sale, irrespective of being housed inside a larger master carton for export.
The ruling referenced an official FAQ from the Central Board of Indirect Taxes and Customs (CBIC) which clarified that if multiple retail packs are sold in a larger package, GST applies. Consequently, the authority held that the supply of such pre-packaged shrimp in units up to 25 kg is a taxable event, liable to a 5% GST rate, regardless of whether it is meant for the domestic market or for export.
The bench, comprising K. Ravi Shankar and B. Lakshmi Narayana, ruled affirmatively on both questions posed by the exporter, confirming that their packaged shrimp exports are indeed subject to GST. This ruling brings clarity to the tax treatment of exported packaged food items and establishes that the export status of a good does not override the tax implications of its retail-level packaging.
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