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

FACTS & SUBJECT MATTER:
(1) Status of unbranded and non packaged Broken Rice, in reference to Notification No. 07/2022 - Central Tax (Rate) and “FAQ on GST applicability on pre-packaged and labelled goods”.
(2) 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.

CASE LAW: Tamal Kundu [WBAAR 18 of 2023 dated September 13, 2023

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:
(1) 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.
(2) 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.
(3) 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.
(3) Therefore, the aforementioned goods packaged and labelled in abovesaid manner would not be considered as pre-packaged and pre-labelled for levying of GST.
(4) 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.
(5) Held that, tax is not payable by the Applicant on supply of broken rice if supplied in other then prepackaged
and labelled form as stated in the Notification.
Conclusion: The AAR West Bengal’s ruling provides clarity on the GST treatment of unbranded and nonpackaged Broken Rice, reinforcing that such supplies are exempt from GST as per the prevailing Notification.
This decision is essential for businesses involved in the production and sale of Broken Rice, offering a clear understanding of the taxation implications associated with the packaging and labeling of this commodity.

Click to download Order in the case of Tamal Kundu (WBAAR 18 of 2023 dated September 13, 2023)

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