Packaged commodity exemption turns on strict compliance, with hotels treated as industrial consumers and inter-branch transfers taxable.

Hotels are treated as industrial consumers, not institutional consumers, under the Legal Metrology (Packaged Commodities) Rules, 2011, because the goods are used in commercial food preparation and sale. Exemption for frozen meat products supplied as packaged commodities is available only when the statutory conditions are strictly met, including the prescribed declaration and qualifying purchase channel; on the stated facts, the packages lacked the required declaration, so exemption was denied. Inter-branch transfers between separately GST-registered distinct persons are taxable supplies under section 25(4) and Schedule I unless a valid exemption applies, and GST was also held payable on supplies to distributors marked for institutional sale on the facts presented.

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Issues: (i) Whether hotels qualify as industrial or institutional consumers under the Legal Metrology (Packaged Commodities) Rules, 2011; (ii) whether supplies of frozen meat products to such consumers are outside the scope of pre-packaged and labelled goods and therefore exempt from GST, with consequential availability of input tax credit; (iii) whether inter-branch transfers to a separate GST-registered branch are liable to GST as supplies between distinct persons; and (iv) whether GST is payable on supplies of such packed goods to distributors marked for institutional sale.

Issue (i): Whether hotels qualify as industrial or institutional consumers under the Legal Metrology (Packaged Commodities) Rules, 2011.

Analysis: The definitions under Rule 2(bb) and Rule 2(bc) were applied to the nature of hotel use. The deciding factor was that goods purchased by hotels are used in the course of commercial activity, namely preparation and sale of food to customers, and therefore the hotel does not answer the requirements of an institutional consumer. The Authority treated hotels as falling within the industrial consumer category for the limited purpose of the packaged commodities rules.

Conclusion: Hotels qualify as industrial consumers, not institutional consumers.

Issue (ii): Whether supplies of frozen meat products to such consumers are outside the scope of pre-packaged and labelled goods and therefore exempt from GST, with consequential availability of input tax credit.

Analysis: The Authority read the GST rate and exemption notifications together with Rule 3(c) of the Legal Metrology (Packaged Commodities) Rules, 2011. Exemption for packaged commodities meant for industrial or institutional consumers was held to depend on fulfilment of the prescribed conditions, especially the declaration "Not for Retail Sale" and purchase directly from the manufacturer, importer, or wholesale dealer for the permitted use. On the facts, the packages bore only "For Institutional sale only" and not the mandatory declaration, so the condition precedent for exclusion from GST treatment was not satisfied. The Authority also noted that input tax credit would not be available only where the outward supply is validly treated as exempt.

Conclusion: Such supplies are not exempt on the facts stated, and input tax credit cannot be availed where the exempt character is lawfully established.

Issue (iii): Whether inter-branch transfers to a separate GST-registered branch are liable to GST as supplies between distinct persons.

Analysis: Section 25(4) was applied to treat multiple registrations as distinct persons, and Schedule I was relied upon for the principle that supplies between distinct persons in the course or furtherance of business are treated as supplies even without consideration. The Authority held that transfers to a separately registered branch outside the State are taxable unless the claimed exemption conditions are met. As the packages did not carry the required declaration, the transfers did not fall within the exempt category.

Conclusion: GST is chargeable on the inter-branch transfers on the facts of the case.

Issue (iv): Whether GST is payable on supplies of such packed goods to distributors marked for institutional sale.

Analysis: The Authority applied the same packaged-commodity analysis and held that the goods would be exempt only if the statutory conditions for industrial or institutional consumer supplies were fulfilled. Because the mandatory declaration was absent and the distributor's status as a wholesale dealer was not established with certainty, the supply could not be brought within the exempt category.

Conclusion: GST is payable on supplies to distributors on the facts stated.

Final Conclusion: The ruling gives a limited favorable finding on the classification of hotels as industrial consumers, but holds that the applicant's supplies do not qualify for exemption on the facts presented and that GST is payable on the impugned outward transactions where the statutory conditions are not met.

Ratio Decidendi: Exemption for packaged commodities supplied to industrial or institutional consumers applies only when the statutory conditions under the Legal Metrology rules are strictly satisfied, including the prescribed declaration, and supplies between distinct GST-registered persons are taxable as supplies in the course of business.

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