2025 (2) TMI 1259 - AAR - GST

Pre-packaged processed frozen shrimps (HSN 0306) under Legal Metrology Act are taxable at 5% GST for all supplies

AAR held that processed frozen shrimps (HSN 0306) pre-packaged and labelled in individual pouches/boxes and placed in printed master cartons up to 25 kg ... Levy of GST - export of processed frozen shrimps (HSN:0306), which are packed in individual printed pouches or boxes and subsequently placed inside a printed master carton (with a maximum weight of 25 kgs each) that includes the design, label and other specifications about the product - export of processed frozen shrimps (HSN:0306), packed in individual printed pouches or boxes and subsequently placed inside a printed master carton weighting up to 25 kilograms - HELD THAT:- In the instant case, the supply of shrimps in pouches or boxes of upto 25kg, which duly pre-packaged and labelled as per Legal Metrology Act 2009 is a taxable supply which is neither exempted nor nil rated supply . As per the N/N 06/2022 (CT Rate), dated 13th July 2022,GST has been made applicable on supply of such “pre-packaged and labelled” commodities attracting provisions of Legal Metrology Act, 2009. Therefore, where the quantity involved is 25 kgs or less in respect of specified commodities including shrimps (HSN 0306, as per S.No.4 of schedule 1 of notification 01/2017-central tax (rate) dated 28th June 2017) which are pre-packed, they would mandatorily get covered within the ambit of Legal Metrology Act, 2009, and the rules made there under. Accordingly, GST would be applicable on the supply of “pre-packaged and labelled” shrimps, capacity upto 25 kgs, it will be liable for GST @ 5%, irrespective of the fact whether it is for domestic supply or for exported outside the country. ISSUES PRESENTED AND CONSIDERED 1. Whether the export of processed frozen shrimp (HSN 0306) packaged in individually printed pouches/boxes (weighing approx. 250 g to 2 kg) and packed into printed master cartons (maximum 25 kg) qualifies as 'pre-packaged and labelled' within the meaning of the Explanation to the relevant GST notification (reading into the Legal Metrology Act, 2009) and thereby attracts GST. 2. Whether the export of processed frozen shrimp (HSN 0306) packaged in individually plain pouches/boxes (250 g to 2 kg) and packed into plain master cartons (maximum 25 kg) qualifies as 'pre-packaged and labelled' for GST purposes and thereby attracts GST. 3. Whether the effect of Notification No. 06/2022 (CT Rate) dated 13.07.2022 and the incorporated Explanation (referring to the Legal Metrology Act, 2009 and rules thereunder) extends to supplies made for export, including when declarations/label requirements arise under the Legal Metrology (Packaged Commodities) Rules, 2011 (including the 25 kg threshold). ISSUE-WISE DETAILED ANALYSIS Issue 1: Printed inner packs (250 g-2 kg) placed in printed master cartons (=25 kg) - whether such export supplies are 'pre-packaged and labelled' attracting GST Legal framework: The Explanation to the Schedule entry (Notification No. 06/2022) defines 'pre-packaged and labelled' by reference to 'pre-packaged commodity' as defined in Section 2(1) of the Legal Metrology Act, 2009, and requires that the package or label be required to bear declarations under the Legal Metrology Act and rules. IGST/CGST provisions treat exports as inter-State supplies and as zero-rated supplies under IGST Act, with procedural options for refund or export under bond/ LUT. Precedent treatment: The applicant relied on prior Advance Rulings concerning pre-packaged food exports (referring to rulings on rice). The authority noted CBIC FAQs and Ministry of Finance press release (18.07.2022) as interpretative guidance with persuasive value. Interpretation and reasoning: A 'pre-packaged commodity' requires (a) placement in a package without purchaser present with a pre-determined quantity and (b) requirement to bear declarations under Legal Metrology rules. The inner printed pouches/boxes in the stated weights (250 g-2 kg) indisputably contain pre-determined quantities and are printed to bear product particulars as required by Legal Metrology; therefore they satisfy both limbs of the Explanation. The presence or absence of printing on the outer/master carton does not alter the character of inner retail packs. The CBIC FAQ clarifies that multiple retail packages sold in a larger pack continue to be pre-packaged and labelled goods for GST purposes. Notification No. 06/2022 specifically brought such 'pre-packaged and labelled' commodities within the taxable entries (subject to the Legal Metrology requisites) and explicitly applies to supplies irrespective of whether for domestic sale or export. Ratio vs. Obiter: Ratio - where inner packaging (250 g-2 kg) constitutes a pre-packaged commodity required to bear Legal Metrology declarations, such supplies fall within 'pre-packaged and labelled' as per the Explanation and Notification No. 06/2022 and thus attract GST at the specified rate. Persuasive/interpretative material (CBIC FAQs and press release) is treated as supporting reasoning (obiter-value) but not displacing statutory text. Conclusion: Affirmative - the export of processed frozen shrimp packaged in individually printed pouches/boxes (approximately 250 g-2 kg) and placed in printed master cartons (=25 kg) is 'pre-packaged and labelled' under the incorporated Legal Metrology test and is liable to GST (rate applied as per Schedule entry, identified as 5%). Issue 2: Plain inner packs (250 g-2 kg) placed in plain master cartons (=25 kg) - whether such export supplies are 'pre-packaged and labelled' attracting GST Legal framework: Same statutory nexus - Notification No. 06/2022's Explanation referring to the Legal Metrology Act; role of Rule 3(a) of Legal Metrology (Packaged Commodities) Rules, 2011 in specifying thresholds and declaration obligations. Precedent treatment: The authority examined the Legal Metrology definition and Government clarifications which distinguish packages that require declarations under Legal Metrology from those that do not; the press release states that packages not requiring Legal Metrology declarations will not be treated as pre-packaged and labelled for GST levy. Interpretation and reasoning: Key determinant is whether the package (inner pack) is required to bear declarations under the Legal Metrology Act and rules. If the plain inner pack is nonetheless a pre-packaged commodity having pre-determined quantity and legally required to carry declarations, it will attract GST irrespective of whether the pack is printed or plain in appearance. The factual finding in the instant application is that inner packs generally are printed and carry particulars; therefore the ruling addresses both printed and plain master cartons but focuses on the inner pack's characteristics. The authority's conclusion treats inner packaging that meets Legal Metrology requisites as determinative; absence of outer printing is immaterial. The press release caveat (no GST where no Legal Metrology declarations required) is acknowledged but not applicable to the present factual matrix where inner packs require declarations. Ratio vs. Obiter: Ratio - the legal test is whether Legal Metrology rules mandate declarations on the particular package (inner pack). If yes, GST applies irrespective of outer carton printing; statements about packages that do not require declarations remain obiter guidance for non-applicable factual situations. Conclusion: Affirmative - where inner packaging (even if placed in plain master cartons) is a pre-packaged commodity required to bear Legal Metrology declarations (as in the present case), the export is liable to GST at the applicable rate. Issue 3: Applicability of Notification No. 06/2022 and Legal Metrology requirements to exports and the significance of the 25 kg threshold Legal framework: Notification No. 06/2022 amends the Schedule to include 'pre-packaged and labelled' goods as taxable; Explanation ties the expression to the Legal Metrology Act. Rule 3(a) of Legal Metrology (Packaged Commodities) Rules, 2011 contains thresholds (25 kg/25 litres) relevant to the classification of certain food packages. Precedent treatment: The authority considered the Ministry of Finance press release and CBIC FAQs as persuasive interpretative material, and noted earlier AAR rulings on analogous packages (e.g., rice) treating packages up to 25 kg as within the Legal Metrology definition and thereby attracting GST where the conditions are met. Interpretation and reasoning: Notification No. 06/2022 does not carve out exports from its purview; the Legal Metrology Act and its rules apply to commodities packed in India irrespective of whether final sale is domestic or export. For specified commodities, packages containing quantity up to 25 kg fall within the purview of the Legal Metrology definition (subject to exclusions). Thus where a package (inner pack or master carton comprised of retail packs) requires declarations under Legal Metrology rules, Notification No. 06/2022 renders such supplies taxable for GST purposes even when supplied for export. The CBIC FAQ confirms that multiple retail packs inside a larger pack continue to be taxable if the retail packs are meant for eventual retail sale. The exporter's option under IGST (zero-rating mechanism) for refund does not alter the characterization of the supply as taxable under the rate schedule. Ratio vs. Obiter: Ratio - Notification No. 06/2022 and the Legal Metrology linkage apply to export supplies where declaration requirements under Legal Metrology rules are triggered; the 25 kg threshold is a material benchmark in determining applicability for certain food items. The clarificatory press release and FAQs are persuasive aids (obiter-value) in application of the statutory test. Conclusion: Notification No. 06/2022's scope extends to export supplies where the Legal Metrology Act/rules require declarations on the package; specified commodities in packages up to 25 kg that meet Legal Metrology criteria are covered and attract GST (subject to the IGST zero-rating/refund mechanism available to exporters).