WB AAR: 5% GST on Pre-Packaged & Labelled Broken Rice While No Tax on Unbranded

In a recent ruling, the West Bengal Authority of Advance Ruling (AAR) has clarified the applicability of GST on the supply of broken rice. According to the AAR, if broken rice is supplied in a pre-packaged and labelled form, it will attract a 5% GST rate. However, if the supply is unbranded, no GST shall be payable.

The AAR bench, consisting of Tanisha Dutta and Joyjit Banik, noted that broken rice falls under Chapter Heading 1006. Under this, the tax rate on the supply of broken rice would be the same as the rate applicable to rice.

As per Notification No. 06/2022-Central Tax (Rate) dated July 13, 2022, a 5% GST is applicable on pre-packaged and labelled rice products effective from July 18, 2022. Conversely, the supply of rice, excluding pre-packaged and labelled rice, is exempted from Goods and Services Tax (GST) as per Notification No. 07/2022-Central Tax (Rate) issued on July 13, 2022, and this exemption has been in effect from July 18, 2022.

Rice is covered under the Heading 1006 of the Customs Tariffs. And Chapter 10, note 1(b) of the chapter does not include grains that have been hulled or otherwise processed. However, rice that has been husked, milled, polished, glazed, parboiled, or broken remains to be classified under heading 1006.

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The applicant, who is engaged in rice manufacturing, has stated that during the process of milling rice, fragments of the complete round rice grain are produced, commonly referred to as broken rice.

The applicant requested an early decision on whether the sale of unbranded or non-packaged broken rice generated during the manufacturing process would be subject to a 5% tax.

The AAR ruled that the applicant is not liable to pay tax on the supply of broken rice if it is supplied “other than pre-packaged and labelled” as specified in Notification No. 07/2022-Central Tax (Rate) dated July 13, 2022.