No GST On 14 Items, Including ‘Mudhi’, When Sold Loose; Finance Minister Clarifies With 14 Tweets

Bhubaneswar: Finance Minister Nirmala Sitharaman on Tuesday clarified through a series of tweets that no GST will be levied on 14 items when sold loose.

“Recently, the GST Council in its 47th meeting recommended to reconsider the approach for imposition of GST on specified food items like pulses, cereals, flour, etc. There have been a lot of misconceptions about this that have been spread,” she tweeted.

The Finance Minister asserted that states have been collecting significant revenue from foodgrain in the pre-GST regime. “Punjab alone collected more than Rs 2,000 cr on food grain by way of purchase tax. UP collected Rs 700 cr,” she wrote.

She further said that when GST was rolled out, 5% was made applicable on branded cereals, pulses and flour. Later this was amended to tax only such items which were sold under a registered brand or brand on which enforceable right was not foregone by supplier.

Rampant misuse of this provision by reputed manufacturers and brand owners led to a gradual fall in GST revenue from these items, she noted.

“This was resented by suppliers and industry associations who were paying taxes on branded goods. They wrote to the government to impose GST uniformly on all packaged commodities to stop such misuse. This rampant evasion in tax was also observed by States,” Sitharaman further wrote.

The Fitment Committee—consisting of officers from Rajasthan, West Bengal, Tamil Nadu, Bihar, Uttar Pradesh, Karnataka, Maharashtra, Haryana and Gujarat—had also examined this issue over SEVERAL meetings and made its recommendations for changing the modalities to curb misuse. It is in this context that the GST Council in its 47th meeting took the decision. With effect from July 18, 2022, only the modalities of imposition of GST on these goods were changed with no change in coverage of GST except 2-3 items.

“It has been prescribed that GST on these goods shall apply when supplied in “pre-packaged and labelled” commodities attracting the provisions of the Legal Metrology Act/ For example, items like pulses, cereals like rice, wheat, and flour, etc, earlier attracted GST at 5% when branded and packed in unit container. From 18.7.2022, these items would attract GST when ‘pre-packaged and labeled’,” she informed.

Listing out the items that will attract no GST when sold loose, she said that this was a unanimous decision by the GST Council. All states were present in GST Council when this issue was presented by the Group of Ministers on Rate Rationalisation in the 47th meeting held in Chandigarh on Jun 28.

“All states, including non-BJP States (Punjab, Chhattisgarh, Rajasthan, Tamil Nadu, West Bengal, Andhra Pradesh, Telangana, Kerala) agreed with the decision. This decision of the GST Council is yet again by consensus. Further, the GoM that recommended these changes was composed of members from West Bengal, Rajasthan, Kerala, Uttar Pradesh, Goa & Bihar and was headed by CM of Karnataka. It carefully considered this proposal, taking into account the tax leakage,” she said.

Sitharaman concluded her series of tweets by stating that this decision was a much-needed one to curb tax leakage. “It was considered at various levels including by officers, and the Group of Ministers, and was finally recommended by the GST Council with the complete consensus of all members,” she added.

Notably, Odisha Assembly witnessed noisy scenes over the Centre’s decision to levy 5 per cent GST on puffed rice (mudhi), flattened rice (chuda) and several other items consumed by the poor on Monday.

While Congress MLA Suresh Kumar Routray had demanded that the state government should bear the burden to spare the poor people from its effect, Finance Minister Niranjan Pujari said they cannot do anything about the imposition of GST.