Institutional-consumer exemption for pre-packaged frozen chicken applies only when statutory conditions are met; non-institutional supplies attract GST.

Frozen chicken in wholesale packs marked for institutional sale is exempt from GST only when the supply satisfies the Legal Metrology-based institutional-consumer conditions, including use by the institution and not for trade or commercial resale. The exemption can also apply where the goods are routed through a wholesale dealer to institutional consumers, but only if the same statutory conditions are met and the end use remains institutional. Supplies to non-institutional consumers do not qualify for the exemption and are taxable at the prescribed 5% GST rate for pre-packaged and labelled goods.

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Issues: (i) Whether frozen chicken supplied in wholesale packs bearing the declaration "packed exclusively for institutional sale and not for retail sale" is eligible for exemption when sold directly to institutional consumers; (ii) whether the same goods are exempt when supplied to a distributor who further supplies them to institutional consumers, provided the distributor is a wholesale dealer; (iii) whether supply of the same goods to non-institutional consumers is taxable at 5% GST.

Issue (i): Whether frozen chicken supplied in wholesale packs bearing the declaration "packed exclusively for institutional sale and not for retail sale" is eligible for exemption when sold directly to institutional consumers.

Analysis: The exemption under Notification No. 2/2017-Central Tax (Rate) applies to goods other than fresh or chilled that are not pre-packaged and labelled. The expression "pre-packaged and labelled" is linked to the Legal Metrology Act, 2009 and the declarations required under the Legal Metrology (Packaged Commodities) Rules, 2011. The supply qualifies for exemption only where the package is meant for institutional consumers and the institutional consumer conditions are satisfied, including that the goods are for use by the institution and not for commercial or trade purposes.

Conclusion: The supply is exempt only if the institutional-consumer conditions are established; otherwise, exemption is not available.

Issue (ii): Whether the same goods are exempt when supplied to a distributor who further supplies them to institutional consumers, provided the distributor is a wholesale dealer.

Analysis: A supply intended for institutional consumers may retain the exemption when routed through a distributor, but the end use must still fall within the exclusion for institutional consumers under Rule 3(c) of the Legal Metrology (Packaged Commodities) Rules, 2011. The exemption depends on the same statutory conditions being met, and the intermediary must be a wholesale dealer.

Conclusion: The supply is exempt only if the goods are ultimately for institutional use and the distributor is a wholesale dealer.

Issue (iii): Whether supply of the same goods to non-institutional consumers is taxable at 5% GST.

Analysis: Once the goods are supplied to non-institutional consumers, the exclusion from the exemption entry does not apply. Such goods fall within the rate entry for pre-packaged and labelled goods under Notification No. 1/2017-Central Tax (Rate), attracting GST at the prescribed rate.

Conclusion: The supply to non-institutional consumers is taxable at 5% GST.

Final Conclusion: Exemption was recognized only for supplies that satisfy the statutory institutional-consumer conditions, while supplies to non-institutional consumers were held taxable.

Ratio Decidendi: A packaged commodity is exempt from GST only when it falls outside the "pre-packaged and labelled" category by satisfying the Legal Metrology-based institutional-consumer exclusion; otherwise, the applicable GST rate applies.

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