In a series of tweets, Finance Minister Nirmala Sitharaman provided clarification on the application of GST on several basic food items.
She said: The GST Council recently advised reconsidering the strategy for imposing GST on certain food commodities including pulses, cereals, flour, etc. at its 47th meeting. This has been the subject of many widespread myths.
FM Sitharaman brought forth the facts succinctly in a series of tweets. According to FM, taxes on certain food items have been imposed in the past.
“Does this represent the first time that such food items have been taxed? No. In the pre-GST era, foodgrain was a substantial source of revenue for the states. By way of purchase tax, Punjab alone brought in more over Rs 2,000 crore on food grains. UP received Rs. 700 billion, “Tweeted her.
Due to this, when the GST was implemented, BRANDED cereals, pulses, and flour were subject to a 5 percent GST charge. Later, this was changed to only tax goods sold under REGISTERED brands or brands on which the supplier has not waived an enforceable right. She added that as reputable producers and brand owners quickly noticed widespread abuse of this clause, GST revenue from these goods steadily decreased dramatically.
Suppliers and trade groups who were paying taxes on branded goods RESENTED this. To prevent this misuse, they wrote to the government urging them to implement GST consistently on all packaged goods. States also noted this widespread tax avoidance. FM added that the Fitment Committee, which was made up of officers from Rajasthan, West Bengal, Tamil Nadu, Bihar, Uttar Pradesh, Karnataka, Maharashtra, Haryana, and Gujarat, had also looked into this matter over a number of meetings and had made recommendations for altering the modalities to prevent misuse.
The decision was made by the GST Council in this context during its 47th meeting. With effect from July 18, 2022, only the procedures for applying the GST to these items changed; the GST’s coverage remained the same, with the exception of a few items. It has been specified that when these things are supplied in “pre-packaged and labelled” commodities that are under the purview of the Legal Metrology Act, GST will be applicable.
FM referenced the prior GST rate of 5% for products like pulses, cereals like rice, wheat, and flour when they were branded and packaged in unit containers. These goods would be subject to GST starting 18.7.2022 if they were “pre-packaged and branded.”