GST on the export of up to 25 kg of pre-packaged and labelled rice to overseas buyers

Fact and issue of the case

To file an application before the Authority of Advance Ruling, the applicant must satisfy the conditions prescribed under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (hereinafter referred to as HGST Act, 2017). Since the provisions of both the Acts are parimateria, any reference to provisions of CGST Act, 2017 in this order should be construed as a reference to corresponding provisions in HGST Act, 2017/IGST Act, 2017 as well.

Sections 97(2) of the CGST Act, 2017 prescribes that Advance Ruling may be sought inter alia on the question of (b) Applicability of a notification issued under the provisions of this Act (e) Determination of the liability to pay tax on any goods or services or both.

Proviso with reference to the Section 98(2) of CGST Act, 2017 states that where the questions raised in the application is already pending or decided in any proceedings in the case of the applicant under any provision of this Act, the application may be rejected by the Advance Ruling Authority after providing an opportunity of being heard to the applicant. And in this case, the applicant has undertaken in form ARA-01 that the issue is neither pending nor decided in any proceedings under any of the provisions of the Act. Besides the applicable fees in the case has been paid. So, he is eligible to seek an Advance Ruling under the above provisions and the case is being heard on merits.

Statement of facts as per ARA-01

That the applicant is engaged in the business of manufacturing and supplying of rice and we are supplying rice to customers in pre-packaged and labelled packages, having quantity upto 25 kilograms.We have 3 types of customers to whom sales/supplies are executed details of which is as under:

A. Customers located abroad (“foreign buyer supplies”):-

i) Foreign buyer provides the specifications which have to be printed/labelled on the packages of rice, which are intended for sale to it. Therefore, we procure empty bag and get them printed/labelled according to the specifications of the foreign buyer from supplier of packing material.

ii) The supplier of packing material dispatches the printed/labelled empty bags, having capacity upto 25 kgs, to our premises.

iii) We pack rice in our factory in these bags and export it to foreign buyer.

Observation of the court

The Authority has deliberated upon all the factual details and legal provisions with reference to the issue at hand and equally considered the verbal submissions made by the representative of the applicant during the personal hearing. Besides the details of the matter available on the case file has also been perused by us. It is noticed that the applicant is a manufacturer of rice and supplies the goods in the taxable as well as non taxable territory. He has mentioned that there are three types of customers to whom the supply of rice is being made.-

i. The applicant exports the goods to the foreign buyer/recipient after procuring the empty bags from the domestic market and printing and labelling it as per the specification given by the recipient of the goods and pack 25 Kg rice in the said labelled and printed bag.

ii. In the mode of “bill to ship to” model of export of the goods, the applicant receives the printed/labelled empty having capacity upto 25 kg from the supplier of the packing materials to his own premises on the direction of the exporter and thereafter the applicant pack the rice in these bags and dispatch the pre packaged and labelled goods to the custom port on the instruction of the exporter (i.e. bill to exporter and ship to custom port).

iii. Thirdly, the applicant pack the rice in printed and labelled empty bags having capacity upto 25 Kg provided by the exporter and dispatch the pre-packaged and labelled goods to the factory of the exporter (supply of pre-packaged and labelled rice to the customers located in the taxable territory for the purpose of export).

On the above mode of supplies, the applicant has sought an advance ruling that whether these supplies attract the levy of tax under the GST Act, 2017 or not? The authorities observations after going through the contents of the matter is that the legislature intention is that the supply of the rice in packets of upto 25 Kg which are duly pre-packaged and labelled as per the Legal Metrology Act, 2009(1 of 2010) and the rules made thereunder is an taxable event and It’s not an exempted/nil rated supply. Besides Ministry of Finance, Govt, of India has clarified the applicability of GST on pre-packaged and labelled goods through FAQs which were uploaded online on 18th July, 2022 w.r.t the notification no. 6/2012-CT(Rate). Though FAQs are not binding on the statutory authorities but they have a persuasive value for any authority while interpreting the legal provisions. From the perusal of the said notification and subsequent clarification on it, it can be said that in the present matter if supplied goods are the prepackaged and labelled and in the packages of less than or equal to 25 kg in quantity then the same are taxable. Further, the scope of supply under the GST Act, 2017 is an all encompassing event and only goods and services which have been categorically declared as non taxable/exempted/nil rated supplies under the Act are outside the purview of the section 7 of the CGST Act, 2017. In the light of this discussion, the Authority is of considered view that the transactions undertaken by the applicant falls within the purview of the scope of supply and attracts levy of tax as applicable under the CGST/HGST/IGST Act, 2017.