GST not leviable on sale of unbranded/non packaged Broken Rice

The West Bengal Authority for Advance Ruling (AAR) has determined that GST is not applicable to the sale of unbranded and unpackaged broken rice. This ruling clarifies that while pre-packaged and labelled broken rice may be subject to GST, loose broken rice, often used for animal feed, is exempt. The decision aligns with recent notifications and press releases concerning GST on pre-packaged goods.

The AAR, West Bengal, in the case of In Re:Tamal Kundu[WBAAR 18 of 2023 dated September 13, 2023], held that as per Notification No. 07/2022-Central Tax (Rate) dated July 13, 2022, ("the Notification") and Press Release dated July 18, 2022("the Press Release") on subject matter "FAQ on GST applicability on pre-packaged and labelled goods" ("FAQ"); GST is not leviable on sale of unbranded/non packaged Broken Rice.

Facts

Mr. Tamal Kundu, ("the Applicant") entered into agreement for custom milling of paddy with the State Government. The Applicant directly procures the paddy from the farmers. The Paddy is further processed, generating around 68 Kg of rice from one quintal of paddy. During the production of rice, two percent rice is damaged during the polishing stage, termed as Broken Rice, The Broken Rice produced, is sold in unbranded and unpackaged manner, generally used for Animal Feeding.

Thereafter, the Applicant filed an Advance Ruling Application ("the Application") raising the question whether GST is to be charged at the rate of five percent on sale of unbranded/non packaged Broken Rice generated from the manufacturing process?

Issue

Whether GST is leviable on the sale of unbranded/non-packaged Broken Rice?

Held

The Hon'ble AAR, West Bengal, in WBAAR 18 of 2023 held as under:

• Noted that, the Broken Rice would be classifiable under Chapter Heading 1006 and same rate would be applicable as in case of supply of rice.
• Further noted that, the Notification exempts the supply of Rice which is in other than pre-packaged and labelled form with effect from July 18, 2022.
• Further Noted that, as per the Press Release and FAQ it was clarified that, the food items such as pulses, cereals like rice, wheat flour etc.), supply of specified pre=packaged food article would fall within the purview of definition of "pre-packaged commodity" under Legal Metrology Act. Also, the supply of packaged commodity for industrial use would not come within the purview of Legal Metrology Act. Therefore, the aforementioned goods packaged and labelled in abovesaid manner would not be considered as pre-packaged and pre-labelled for levying of GST.
• Opined that, the Applicant is liable to pay tax at the rate of five percent on supply of "broken rice" if supplied in pre-packaged and labelled form. If not, then such supply is exempted from payment of tax.
• Held that, tax is not payable by the Applicant on supply of broken rice if supplied in other then pre-packaged and labelled form as stated in the Notification.