The Honorable Finance Minister, Mr. Arun Jaitley had said that the prices of food grains, especially wheat and rice, will come down as they will be exempt from GST. On the first day, the GST Council had categorized 80 to 90 per cent goods and services under the four tax slabs stipulated under the GST Act where the essential commodities had been placed in the lowest tax bracket that is 5%. “We have finalised tax rates for majority of items as well as the exempt list at today’s meeting,” Mr. Jaitley had declared. But in the very next meeting, the GST Council, which had made items such as cereals and food grain tax-free, imposed a 5% levy on the branded rice, flour and cereals. “We have to finalise a definition of branding. Once that is done, we can and possibly will impose a 5 per cent tax on branded food grain and cereals,” explained the Ministry official. Branded rice and cereals are sold at a premium and their buyers can well afford a mild tax on them, he claimed.
But voices from various quarters of the Agri Product Industries have erupted over this period who are somewhat baffled by such catagorisations of branded verses non- branded and some state taxes that are still prevalent. According to an Industry expert and newly elected AIREA President, Mr. Vijay Setia, “GST is a giant step forward for the entire rice industry that will offer a level playing field by working on ‘One Country One Tax’ principle. I congratulate our Central Government by introducing the biggest economic reform of independent India.” But at the same time he was critical of the local government, which has been assured of compensation in case of any shortfall in the tax collection, is still putting additional 4 % tax (which is 2% market fee and 2% HRDF). He was aghast and said, “I fail to understand the logic of the Haryana state bureaucrats in all this; are they living in another country?” When the Indian government wants a uniform tax then why are they failing in their state obligations and duties unless there are some personal benefits in for them? As a norm, a processor has to put several information such as name of the company, date of packing etc. as per requirement of weights and measures department and Food Safety and Standards Authority of India on the rice pack thus making the rice pack as ‘branded’ and therefore inviting taxes. When branded rice is going to face 5% GST and 4% additional taxes are to be collected over it, it means the state government is trying to defeat the policy of Government of India and GST. I feel a strong protest is going to erupt over this and government would be taken for a surprise.
But in the recently concluded CII event, Mr. Hasmukh Adhia Revenue Secretary responded to GST concerns of India Inc. and clarified the definition of Branded Food Grains while replying to Ms. Priyanka Mittal, Director KRBL, representing the agriculture industry. Ms. Mittal asked a pertinent question concerning the Branded Rice Industry that when the premise of GST is ‘One Commodity One Tax’ and the Government of India is mandated to focus on the merger of the unbranded into branded economy, then how is unbranded rice exempted but branded rice attracts 5% GST and if so than isn’t it moving away from the core focus of the government?
Mr. Adhia explained the definition of branded food grains saying that just packing of food grains in packets of different weights will not attract any GST. Only if some trade-mark is used and a premium is charged to the customer on the account of a brand value, than it will attract GST of 5%. Moreover since the producer is paying a GST on the advertising and marketing of the branded rice than he can claim input credit incurred on it. This should dispel some doubts over 5% GST on branded rice for the moment.