Companies go for 25 kg packs to avoid 5% GST on pre-packed food items
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After the Centre imposed 5 per cent GST on unbranded labelled and pre-packaged food items weighing less than 25 kg in July, most of the companies are now packing their goods, in excess of 25 kg, in a single packet to be exempted from the tax levy.
In a notification, the Central Board of Indirect Taxes and Customs (CBIC) had clarified that pre-packaged food items like cereals, pulses and flour weighing more than 25 kg and packed in a single packet will be exempted from GST, said a senior GST department official.
Five per cent GST is applied only on packaged food items weighing less than 25 kg.
If a retailer buys a 25 kg packet directly from the distributor or product manufacturer and sells it in retail quantity, then the customers is saved from the GST, but if a person buys a packet of 10 kg of a food item from the market, then he pays 5 per cent from his/her pocket.
While imposition of GST on food items lightens the pockets of the public, a huge amount recovered as tax directly reaches the government coffers. However, the retail traders and manufacturing companies found a way out to counter the Centre's move.
Since food packets weighing more than 25 kg does not attract GST, most of the companies are resorting to packing their goods, weighing more than 25 kgs, in a single packet.
Rakesh Singh, a grocery shop owner in Greater Noida, said that he buys heavier packets directly from companies to avoid the charges.
Companies selling branded cereals and pulses pack food items in packets weighing more than 25 kgs and sell them to kirana stores.
Customers buy these items as retail from grocery shops without having to pay any GST.
