Centre clears air on pre-packaged food tax, says decision based on consensus

The Centre on Monday said the decision to tax pre-packaged food items was taken by the Goods and Services Tax Council, which has representation from both the Centre and the states with the latter having a two-third weightage of the vote.

“The GST Council is the body that recommends GST rates, not the central government,” sources said.

They said that the GST Council is a truly federal body with representatives from every state government, including Union Territories with legislatures, adding all the decisions taken at the 47th GST Council meeting have been through consensus. “The most recent rate rationalisations recommended by the GST Council following its 47th meeting was on the basis of recommendations of the Group of Ministers on Rate Rationalisation,” said the source cited above.

CBIC Issues Clarification

The GoM included members from seven states: Karnataka, Bihar, Goa, Kerala, Rajasthan, Uttar Pradesh, West Bengal, many of which are ruled by the opposition.

“There have been reports that the decision of the GST Council to impose a GST of 5% on prepackaged and pre-labelled retail packs of certain food items is the first time these items are being taxed. This is not true. These items were taxed in the pre-GST VAT system as well,” the official added.

The new rates became effective starting Monday, which made items like atta, curd, milk, paneer and many household items like spoons, forks, knives, besides hotels and bank services, among many other things, more expensive.

Clearing the Air

The Central Board of Indirect Taxes and Customs (CBIC) clarified that all pre-packaged items with up to 25 kg quantity will attract 5% GST while pre-packaged items above 25 kg and in a single packet will be exempt from GST.

It said that if several packages intended for retail sale to the ultimate consumer, say 10 packages of 10 kg each, are sold in a larger pack, then GST would apply to such supply. Such a package may be sold by a manufacturer through a distributor.

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