28 May Understanding GST Implications on Rice, Wheat, Cereals, and Flour
Introduction
The implementation of the Goods and Services Tax (GST) in India brought significant changes to the taxation system, including the treatment of essential commodities like rice, wheat, cereals, and flour. This blog post aims to explain the GST applicability and rates for these food items.
Tax Applicable on Rice, Wheat, Cereals, and Flours under GST
Previously, rice was exempt from GST, but from July 18th, 2022, the exemption on branded commodities was lifted. Now, GST is applicable to both branded and unbranded rice, wheat, cereals, and flours, provided they are pre-packaged and labeled.
Under Chapter 10 of the Harmonized System of Nomenclature (HSN) code, all goods falling under the category of cereals are exempt from GST. This includes various items such as wheat, rye, barley, oats, maize (corn), rice, grain sorghum, buckwheat, millet, canary seeds, and other cereals.
However, if these tax-exempt goods are packaged and labeled as per the provisions of the Legal Metrology Act, they become subject to a 5% GST. A pre-packaged commodity, as defined by the law, should meet specific criteria such as being packed without a purchaser present, having recommended standard packages of specified weights or measures, and following predetermined quantity guidelines.
For example, a package of rice weighing 50 kg would not be considered labeled and pre-packaged, and therefore, not subject to GST. However, if a rice package weighs 20 kg and meets the labeling requirements defined by the Legal Metrology Act, it would be considered a pre-packaged commodity and liable to pay GST on rice.
HSN Code and GST Rates on Rice and Wheat, Cereals
The following HSN codes and corresponding GST rates apply to rice, wheat, cereals, and related products:
| HSN Code | Description | GST Rate |
|---|---|---|
|
Chapter 10 |
All goods falling under the cereals category, put up in unit containers and bearing a registered brand name |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
|
1001, 1008, 1101, 1102, 1109 |
Wheat and meslin, wheat flour and meslin flour, buckwheat, millet, canary seeds, ragi, quinoa, jawar, bajra, wheat gluten, and bran |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
|
1103 |
Cereal groats, meal and pellets, including suji and dalia, pre-packaged and labeled |
Not applicable on goods other than pre-packaged and labeled items, 5% for pre-packaged and labeled items |
|
1102 |
Rye |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
|
1003 |
Barley |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
|
1004 |
Oats |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
|
1005 |
Maize(Corn) |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
|
1006 |
Rice, Rice in husk, Husked (brown) Rice, Rice parboiled, Basmati rice, broken rice, and puffed rice |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
|
1007 |
Grain Sorghum |
0% for goods other than pre-packaged and labeled, 5% for pre-packaged and labeled items |
FAQs on GST on Rice and Wheat
1. What is the GST rate on puffed rice?
• Puffed rice, when sold loose, does not attract GST. However, if it is pre-packaged and labeled, it is subject to a 5% GST rate from July 18th, 2022.
2. Why is there GST on rice in India?
• The Indian Government introduced GST on rice and other essential commodities to standardize taxation and streamline the indirect tax structure. Non-branded rice and wheat products sold in packaged and labeled containers are now charged a 5% GST rate.
3. What is the GST on rice notification?
• The Indian Government issued notification No. 6/2022-Central Tax (Rate) on July 13th, 2022, recommending the imposition of a 5% GST rate on rice, wheat, and other specified commodities sold in packaged containers. This notification brought the Legal Metrology Act into effect for labeling and pre-packaging requirements. The implementation of GST on rice may increase the price of rice by Rs. 3/kg to Rs. 5/kg.
Conclusion
The implementation of GST has led to changes in the taxation of essential commodities such as rice, wheat, cereals, and flour. While these goods are generally exempt from GST, pre-packaged and labeled items are subject to a 5% tax. It is important for businesses and consumers to understand the HSN codes and GST rates applicable to different products to ensure compliance with the tax regulations.
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