2023 (6) TMI 1050 - AAR - GST

Pre-packaged rice up to 25kg attracts GST even for export scenarios when ultimate buyer unknown

AAR, Andhra Pradesh ruled that GST is leviable on supply of pre-packaged and labelled rice up to 25 kg in three scenarios: direct export to foreign buyer, ... GST levy on 'pre-packaged and labelled' commodities - definition of 'pre-packaged commodity' under the Legal Metrology Act, 2009 - applicability of Notification No. 06/2022 - GST on pre-packaged and labelled goods w.e.f. 18-07-2022 - Ministry of Finance clarification on 25 kg threshold and Legal Metrology compliance - applicability of GST to supplies on 'bill to ship to' basis and exportsGST levy on 'pre-packaged and labelled' commodities - definition of 'pre-packaged commodity' under the Legal Metrology Act, 2009 - applicability of Notification No. 06/2022 - GST on pre-packaged and labelled goods w.e.f. 18-07-2022 - Ministry of Finance clarification on 25 kg threshold and Legal Metrology compliance - GST is leviable on supply of pre-packaged and labelled rice up to 25 kgs. - HELD THAT: - The Authority examined Notification No. 06/2022 (as amending the earlier rate notification) which makes GST applicable on commodities that are 'pre-packaged and labelled' as defined by clause (1) of Section 2 of the Legal Metrology Act, 2009. The Ministry of Finance clarification dated 18-07-2022 was relied upon to the effect that, for food items such as rice, the definition applies to packages containing quantity up to 25 kg (subject to exclusions under the Legal Metrology Act and rules). The Authority accepted the applicant's factual position that the rice is packed in bags up to 25 kg and that such packaging falls within the Legal Metrology definition; consequently the supply attracts GST pursuant to the notification and its explanation.GST applies to supply of pre-packaged and labelled rice up to 25 kgs.Applicability of GST to supplies on 'bill to ship to' basis and exports - GST levy on 'pre-packaged and labelled' commodities - Supply of pre-packaged and labelled rice up to 25 kgs to an exporter on 'bill to ship to' basis (bill to exporter and ship to customs port) is subject to GST. - HELD THAT: - The Authority considered the transactional modality where the applicant supplies pre-packaged and labelled rice to an exporter on a 'bill to ship to' basis with shipment to customs for export. Noting the Notification and the Legal Metrology based definition, the Authority held that the character of the supply as 'pre-packaged and labelled' governs levy of GST irrespective of whether the goods are ultimately exported. The fact that the exporter effects the export does not exclude the supply from GST if the commodity meets the 'pre-packaged and labelled' criterion.GST is applicable on such supplies to an exporter on 'bill to ship to' basis.Applicability of GST to supplies on 'bill to ship to' basis and exports - GST levy on 'pre-packaged and labelled' commodities - Supply of pre-packaged and labelled rice up to 25 kgs to the factory/premises of an exporter (who will thereafter export the rice) is subject to GST. - HELD THAT: - Where the applicant packs rice in pre-printed/labelled bags (up to 25 kg) and supplies them to the exporter's factory for subsequent export, the Authority applied the same legal test under Notification No. 06/2022 and the Legal Metrology definition. The Authority observed that the ultimate destination or the fact of intended export does not alter the applicability of GST when the commodity qualifies as 'pre-packaged and labelled'. Therefore such supplies to the exporter's premises are taxable.GST is applicable on supplies of pre-packaged and labelled rice up to 25 kgs made to the exporter's factory/premises.Final Conclusion: The Advance Ruling holds that, in light of Notification No. 06/2022 and the Legal Metrology definition (as clarified by the Ministry of Finance), pre-packaged and labelled rice in packages up to 25 kg attracts GST; this applies equally to direct exports, supplies on 'bill to ship to' basis, and supplies to an exporter's premises where the exporter subsequently effects export. Issues Involved:1. GST applicability on export of pre-packaged and labelled rice up to 25 Kgs to a foreign buyer.2. GST applicability on supply of pre-packaged and labelled rice up to 25 Kgs to an exporter on a 'bill to ship to' basis.3. GST applicability on supply of pre-packaged and labelled rice up to 25 Kgs to the factory of an exporter.Summary:Issue 1: GST applicability on export of pre-packaged and labelled rice up to 25 Kgs to a foreign buyer.The applicant, engaged in manufacturing and supplying rice, sought clarification on whether GST would be levied on the export of pre-packaged and labelled rice up to 25 Kgs to a foreign buyer. The authority referred to Notification No. 06/2022 (CT Rate) dated 18th July 2022, which mandates GST on 'pre-packaged and labelled' commodities as defined in the Legal Metrology Act, 2009. The ruling affirmed that GST is applicable in this scenario.Issue 2: GST applicability on supply of pre-packaged and labelled rice up to 25 Kgs to an exporter on a 'bill to ship to' basis.The applicant queried about the GST applicability when supplying pre-packaged and labelled rice up to 25 Kgs to an exporter, who then ships it to a customs port for export. The authority, referencing the same notification and legal provisions, ruled affirmatively, stating that GST is applicable on such supplies.Issue 3: GST applicability on supply of pre-packaged and labelled rice up to 25 Kgs to the factory of an exporter.The applicant also sought clarity on the GST applicability for supplying pre-packaged and labelled rice up to 25 Kgs to an exporter's factory, where the exporter will subsequently export the rice. The authority confirmed that GST is applicable in this case as well, based on the provisions of the same notification and the Legal Metrology Act, 2009.Ruling:The authority ruled affirmatively on all three questions, confirming that GST is leviable on the export and supply of pre-packaged and labelled rice up to 25 Kgs, whether for domestic sale or export.