Food Show IndiaThe government is likely to relook at the tax rules for edible commodities following instances of some established brands taking refuge in the norms to claim exemption under the goods and services tax (GST). The issue is likely to be taken to the GST Council, two senior officials said.

Certain goods such as cottage cheese or paneer, natural honey, wheat, rice, other cereals, pulses, flour of cereals and pulses, other than those put up in unit container and bearing a registered brand name, attract zero GST. Supply of such goods, when put up in unit container and bearing a registered brand name, attracts 5% GST. Some companies have used this distinction to circumvent the norm to remain in the tax-exempt bracket.

A big rice exporter, KRBL for example, has sent out a notice to its distributors that its popular and premium packaged rice brands like India Gate, Indian Farm, Unity and Lotus were all eligible to enjoy tax exemption under the GST. The reason given by the company is that its application for trademark is still pending and that the brands are not registered. Further the company has also applied for cancellation of some of its trademark registered brands.

Visit to the Indian Government site of Office of the Registrar of Trade Marks throws up more questions than answers. On checking, it showed three different names for one brand. The screen shots below are for all to see.



Vikram-flour-mill-1It means all three companies in this case can be exempted from GST on its rice till the time one of them is allotted the Trade Mark and other two become ineligible. More so some other companies have begun approaching trademark office for cancellation of already granted trademarks to circumvent the norm and join the tax exempt bracket. The experts say that there is a need of some clarity on whether a brand where application has been made could remain exempted. “It is not clear as to whether the brand would be considered as ‘registered’ if an application for trademark has been submitted but not yet approved,” said Pratik Jain, a senior leader at PwC. “There are few companies taking an interpretation that in such cases the product will not be subject to GST.” There is an urgent need to relook at the framework and plug the loopholes, said a senior government official.

Source: Economics times (Edited)