Pre-packaged and labelled rice exports up to 25kg ruled taxable supply under GST despite export destination

AAR Haryana ruled that export of pre-packaged and labelled rice up to 25 kg constitutes a taxable supply under GST. The authority determined that supply of such rice to foreign buyers, exporters on bill-to-ship basis, or exporter factories remains taxable regardless of ultimate export destination. The ruling clarified that pre-packaged and labelled goods meeting Legal Metrology Act requirements are taxable events, not exempted supplies, based on legislative intent and Ministry of Finance clarifications through FAQs dated July 2022.

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Issues: Eligibility criteria for seeking an advance ruling under the Central Goods and Services Tax Act, 2017 and Haryana Goods and Services Tax Act, 2017. Interpretation of legal provisions regarding the applicability of GST on the supply of pre-packaged and labelled rice up to 25 kgs, both for domestic sale and export.

Eligibility for Seeking an Advance Ruling:
The applicant must meet the conditions set forth in the CGST Act, 2017 and HGST Act, 2017 to file an application before the Authority of Advance Ruling. The applicant confirmed that the issue in the application was neither pending nor decided under any provision of the Act, making them eligible for an advance ruling. The case was deemed eligible for consideration based on the provisions of Sections 97(2) and 98(2) of the CGST Act, 2017.

Interpretation of Legal Provisions - GST on Pre-packaged Rice:
The applicant, engaged in rice manufacturing and supply, sought clarification on the GST applicability on pre-packaged and labelled rice up to 25 kgs, for both domestic and export purposes. The applicant believed that GST would apply to such supplies, regardless of the destination. The Ministry of Finance clarified that certain pre-packaged food items, including rice, fall under the purview of the Legal Metrology Act, 2009, if packaged up to 25 kgs. The applicant also questioned the necessity of GST compliance for exports if the supply is exempted.

Comments of the Proper Officer:
The Proper Officer asserted that GST at 5% is applicable on pre-packaged and labelled rice up to 25 kgs, as per Notification No. 06/2022. The officer emphasized that the Legal Metrology Act requirements apply to all goods, whether domestically supplied or exported. The officer confirmed that GST is levied on pre-packaged rice supplied to exporters and factories of exporters, irrespective of the destination.

Discussion and Finding:
After reviewing the facts and legal provisions, the Authority found that the supply of pre-packaged and labelled rice up to 25 kgs is a taxable event under the GST Act, 2017. The Authority considered the legislative intent and Ministry of Finance's clarifications, concluding that such supplies attract GST. The ruling stated that the applicant's transactions fall within the scope of taxable supply, subject to the applicable tax rates.

Ruling:
The Authority ruled that GST is leviable on the export of pre-packaged and labelled rice up to 25 kgs to foreign buyers, on supplies to exporters on a "bill to ship" basis, and on supplies to the factory of exporters. All three scenarios were deemed taxable under the CGST/HGST/IGST Act, 2017, at a rate of 5%.

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