2025 (11) TMI 54 - AAR - GST

Processed frozen shrimps in printed pouches/boxes up to 25 kg are pre-packaged, taxable under Legal Metrology Act and Notification No.06/2022

AAR held that processed frozen shrimps (HSN 0306) packaged in printed pouches or boxes and placed in printed master cartons up to 25 kg are 'pre-packaged ... Levy of GST - export of processed frozen shrimps (HSN 0306), which are packaged in individual printed pouches or boxes and subsequently placed inside a print master carton (with a maximum weight of 25 Kilogram each) that includes the design, label, and other specification about the product - export of processed frozen shrimps (HSN 0306), packaged in individual printed pouches or boxes and subsequently placed inside a printed master carton weighing up to 25 kilograms - HELD THAT:- The applicant submitted that Notification No.6 of 2022-CTR dated 13.7.2022 enumerates that “GST is applicable on the export of ‘pre-packaged and labelled’ commodities as per the provisions of the Legal Metrology Act w. e. f 18.07.2022 - It is found that neither notification no 6/2022 dated 13.07.2022, nor the Legal Metrology Act 2009 has made any differentiation with regard to applicability of GST on exports of goods/ mentioning of declarations or pre-packed commodities for export. In the instant case, the supply of shrimps in pouches or boxes of upto 25kg, which are 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 Notification no 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 25Kgs 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. The 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 is subject to GST - the 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 is subject to GST. ISSUES PRESENTED AND CONSIDERED 1. Whether the export of processed frozen shrimps (HSN 0306) packaged in individual printed pouches or boxes (inner/primary packaging) and subsequently placed in printed master cartons (outer/secondary packaging) up to 25 kg each, falls within the meaning of 'pre-packaged and labelled' as explained in Notification No. 06/2022-CGST(R) and thereby attracts GST. 2. Whether the fact that the supply is an export (zero-rated supply under IGST Act) excludes such pre-packaged and labelled frozen shrimps from GST liability introduced by the amendment to the rate notification and the relevant Legal Metrology provisions. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Characterisation of the packaging as 'pre-packaged and labelled' Legal framework: The amended Explanation to Schedule I of Notification No. 06/2022-CGST(R) (13.07.2022) 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 such package or label be required to bear declarations under the Legal Metrology Act and the rules thereunder. Section 2(1) Legal Metrology Act: 'pre-packaged commodity' means a commodity which, without the purchaser being present, is placed in a package so that the product contained therein has a pre-determined quantity. Precedent treatment: The applicant relied on prior advance rulings addressing similar questions (cited AAR decisions). The Authority referenced CBIC FAQs (18.07.2022) which have persuasive interpretative value. The rulings and FAQs were treated as supportive of the proposition that individual retail packs meant for eventual sale to the ultimate consumer are 'pre-packaged and labelled.' Interpretation and reasoning: The Authority examined the factual matrix - inner/primary packages (pouches/boxes) with predetermined weights generally 250 g to 2 kg, printed with brand and product particulars, further packed in master cartons up to 25 kg. A commodity qualifies as 'pre-packaged and labelled' only if (a) it has a pre-determined quantity and (b) the package or label is required to bear declarations under the Legal Metrology Act and Rules. The inner packages meet both features: they are prepared without the purchaser present, contain predetermined quantities within the Legal Metrology framework, and are printed/labeled as required. The Authority relied on CBIC FAQ clarification that when several retail packages intended for retail sale are sold in a larger pack, the individual retail packs attract GST treatment as pre-packaged and labelled. Ratio vs. Obiter: Ratio - the determination that inner retail packages (250 g-2 kg) carrying printed labels and predetermined quantities satisfy the Legal Metrology definition and thereby constitute 'pre-packaged and labelled' commodities for the purposes of Notification No. 06/2022. Obiter - references to general policy motives behind the amendment (curbing tax evasion) and discussion of cases supportive of the applicant (noted as persuasive rather than binding). Conclusion: The processed frozen shrimps packed in individual printed pouches/boxes of predetermined quantities (typically 250 g to 2 kg) are 'pre-packaged and labelled' within the meaning of the amended Notification/Legal Metrology Act and therefore fall within the taxable category introduced by Notification No. 06/2022-CGST(R). Issue 2 - Applicability of GST to exports of such 'pre-packaged and labelled' commodities Legal framework: IGST Act provisions treat export of goods as inter-State supplies and, by Section 16 IGST Act, as 'zero rated supplies,' permitting export either under bond/Letter of Undertaking (without payment of tax and claim refund of unutilised input tax credit) or with payment of IGST and refund. Notification No. 06/2022-CGST(R) amended rate schedule to make GST applicable on specified 'pre-packaged and labelled' commodities, without distinction between domestic supply and export. Precedent treatment: The Authority considered MOF Press Release (18.07.2022) and relevant AAR decisions referenced by the applicant which held GST leviable on exports of pre-packaged and labelled food items up to 25 kg. The Authority found no provision in Notification No. 06/2022 or in the Legal Metrology Act that exempts pre-packaged commodities meant for export from the GST levy introduced by the notification. Interpretation and reasoning: The Authority reconciled IGST Act zero-rating with the amended GST rate notification by noting: (a) classification of export as inter-State and zero-rated remains; (b) Notification No. 06/2022 brings specified pre-packaged and labelled commodities within taxable entries (subject to tax rates), and (c) zero-rating under IGST does not amount to exclusion from the applicability of GST law or the rate schedule - it only prescribes the treatment (refund mechanisms or export under bond/with IGST and refund). Therefore, pre-packaged and labelled shrimps up to 25 kg are covered by the GST levy introduced by the notification and will attract GST at the notified rate (5% for the relevant entry), with export-specific remedial mechanisms available under IGST. Ratio vs. Obiter: Ratio - exports of pre-packaged and labelled commodities up to 25 kg are subject to GST as per Notification No. 06/2022 and will be taxable at the applicable rate (5%), irrespective of the goods being destined for export; the IGST zero-rating mechanism remains the procedural route for exporters to obtain relief (bond/LOTU or IGST payment and refund). Obiter - policy commentary that the notification's objective includes curbing tax evasion; discussion of interpretation aids (FAQs) characterized as persuasive. Conclusion: Exports of processed frozen shrimps packaged in inner retail packs (predetermined quantities, labelled) and packed in master cartons up to 25 kg are liable to GST under Notification No. 06/2022; exporters may avail themselves of IGST Act zero-rating procedures (export under bond/Letter of Undertaking without payment of tax and claim refund of unutilised ITC, or pay IGST and claim refund). Ancillary findings and cross-references 1. The critical determinant is the character of the inner/primary packaging: if it meets the Legal Metrology definition of pre-packaged commodity and is required to bear declarations, GST applies even when such inner packs are finally exported within master cartons of up to 25 kg (cross-refer to Issue 1 analysis). 2. CBIC FAQs (18.07.2022) and MOF press release are treated as persuasive interpretative material and support the conclusion that multiple retail packs intended for retail sale (even when sold in a larger pack) attract the 'pre-packaged and labelled' GST treatment (cross-refer to Issue 1 and Issue 2 reasoning). 3. The Authority did not distinguish or overrule prior AAR decisions cited by the applicant; those decisions were considered supportive and consistent with the instant ruling to the extent they held GST leviable on pre-packaged and labelled specified commodities exported in packages up to 25 kg.