AP AAR Applies GST on rice bags up to 25 KG When Exporting to Buyers Abroad

GST shall be assessed on the export of pre-packaged and labelled rice up to 25 kg to foreign buyers, Andhra Pradesh Authority of Advance Ruling (AAR) held.

The bench of K. Ravi Sankar and B. Lakshmi Narayana noted that the ultimate buyer is away and the commodity is being pre-packed for an unknown ultimate buyer. The buyer from the petitioner is reselling that to another buyer, be it export or indigenous. The bench approved the observation concerning the applicability of GST on “prepackaged and labelled,” irrespective of whether it is for domestic sale or exported outside the country.

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The petitioner M/s. Sarala Foods Private Limited is engaged in the business of manufacturing and supplying rice. The petitioner supplied rice to customers in pre-packaged and labelled packages, with a quantity of up to 25 kg.

The petitioner mentioned that foreign buyer furnishes the specification which needs to be printed or labelled on the packages of rice wished for sale. The petitioner procures empty bags through the supplier of packing material and gets them printed or labelled as per the foreign buyer’s specifications. With a capacity of up to 25kg, the rice is been packed in empty bags and exported to foreign buyers.

The petitioner asks for an advance ruling, on whether GST shall be charged on the export of pre-packaged and labelled rice up to 25kg to foreign buyers.

The petitioner mentioned that because of the amendment in Entry 51 of Schedule, I of notification No. 1/2017-Central Tax (Rate) dated June 28, 2017, 5% GST is applicable to the supply of pre-packaged and labelled rice with effect from July 18, 2022.

The applicant said that as per explanation (ii) of notification No. 1/2017-Central Tax (Rate), the expression ‘pre-packaged and labelled’ means a ‘pre-packaged commodity’ as defined in clause (I) of Section 2 of the Legal Metrology Act, 2009, where the package in which the commodity is pre-packed or a label securely affixed thereto is needed to bear the declarations under the provisions of the Legal Metrology Act, 2009.

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With the observation concerning the GST applicability on “prepackaged and labelled,” the AAR agreed irrespective of whether it is for domestic sale or exported outside the country.

The AAR ruled that GST would be applicable on the supply of pre-packaged and labelled rice up to 25 kg to the exporter on a “bill to ship to” basis, i.e., bill to the exporter and ship to the customs port. The exporter ultimately exports the rice to a foreign buyer.